PCORI Fees Due July 31, 2023
The Affordable Care Act (ACA) requires health insurance issuers and self-insured plan sponsors to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). The fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return).
Form 720 and full payment of the PCORI fees are due by July 31 of each year and generally cover plan years that end during the preceding calendar year. For plan years ending in 2023, the PCORI fees are due by July 31, 2024.
The PCORI fees were scheduled to expire for plan years ending on or after Oct. 1, 2019. However, a federal spending bill enacted at the end of 2019 extended the PCORI fees for an additional 10 years. As a result, these fees will continue to apply for the 2020-2029 fiscal years.
Calculating the PCORI Fee Payment
In general, the PCORI fees are assessed, collected and enforced like taxes. The PCORI fee applies separately to “specified health insurance policies” and “applicable self-insured health plans” and is based on the average number of lives covered under the plan or policy (see more information here). As a reminder, the fee is paid based upon on the month in which your plan year ended, not the date it started (for example, a plan that renewed on Jan. 1, 2024, technically ended on Dec. 31, 2023). See the chart below for easy reference.
| Policy or plan ending date in month of: | File return no later than: |
Applicable rate: |
| January 2023 | July 31, 2024 | $3.00 |
| February 2023 | July 31, 2024 | $3.00 |
| March 2023 | July 31, 2024 | $3.00 |
| April 2023 | July 31, 2024 | $3.00 |
| May 2023 | July 31, 2024 | $3.00 |
| June 2023 | July 31, 2024 | $3.00 |
| July 2023 | July 31, 2024 | $3.00 |
| August 2023 | July 31, 2024 | $3.00 |
| September 2023 | July 31, 2024 | $3.00 |
| October 2023 | July 31, 2024 | $3.22 |
| November 2023 | July 31, 2024 | $3.22 |
| December 2023 | July 31, 2024 | $3.22 |
Employer Takeaway
Using Part II, Number 133 of Form 720, issuers and plan sponsors are required to report the average number of lives covered under the plan separately for specified health insurance policies and applicable self-insured health plans. That number is then multiplied by the applicable rate for that tax year ($3.00 for plan years ending on or after Oct. 1, 2022, and before Oct. 1, 2023, or $3.22 for plan years ending on or after Oct. 1, 2023, and before Oct. 1, 2024). The fees for specified health insurance policies and applicable self-insured health plans are then combined to equal the total tax owed and submitted prior to July 31.
Please contact your Higginbotham representative if you need assistance in calculating your fees owed this year or for previous years.
EEOC Announces July 9 “Failure to File” Deadline for 2023 EEO-1 Reports
On June 5, 2024, the U.S. Equal Employment Opportunity Commission (EEOC) announced that it had entered the “Failure to File” phase for EEO-1 reporting, as described in the agency’s recently updated EEO-1 Reporting Instruction Booklet.The EEOC offers a fact sheet regarding the failure to file deadline.
This announcement means that if an employer failed to submit a required EEO-1 Report by the “Published Due Date” of June 4, 2024, the EEOC will send it a Notice of Failure to File letter requesting that it complete the submission as soon as possible but no later than July 9, 2024.
After this date, which is deemed the “Failure to File” deadline, no additional 2023 EEO-1 Component 1 Reports will be accepted, and employers that remain out of compliance with EEO-1 reporting requirements may expect to face EEOC lawsuits in federal District Court to compel them to file. In fact, the EEOC recently filed lawsuits against 15 employers for failing to submit their mandatory workforce demographic reports.
EEO-1 Background
The EEO-1 Report is a federally mandated survey that collects workforce data categorized by race, ethnicity, sex and job category. Under Title VII of the Civil Rights Act, certain employers must usually submit EEO-1 Reports by March 31 each year. For 2023 EEO-1 Reports, however, the EEOC had extended the portal’s opening date until April 30, 2024.
Covered Employers
The following entities are subject to EEO-1 reporting:
- A private employer that has 100 or more employees (with limited exceptions for schools and other organizations);
- A private employer with between 15 and 99 employees if it is part of a group of employers that legally constitutes a single enterprise that employs a total of 100 or more employees; and
- A federal contractor that has 50 or more employees; is either a prime contractor or first-tier subcontractor; and has a contract, subcontract or purchase order amounting to $50,000 or more.
Employer Takeaway
Employers filing EEO-1 Reports for the first time must register to receive login information, a password and further instructions for filing from the EEOC. Although the EEOC sends notification letters to employers it knows to be subject to EEO-1 requirements, all covered employers are responsible for obtaining and submitting the necessary information prior to the appropriate deadline.
IRS Issues FAQs on Educational Assistance Programs
Employer-provided education assistance, including student loan payments, is increasingly popular in today’s environment of high education costs, tight workforce competition and specialized job duties. The opportunity to participate in educational programs may not only improve recruitment and retention, but also help employers maintain an educated and skilled workforce.
Recently, the Internal Revenue Service (IRS) issued frequently asked questions (FAQs) that provide general information on educational assistance programs under Section 127 of the Internal Revenue Code (Code).
Under a Section 127 educational assistance program, employers can provide their employees with up to $5,250 per year toward qualified educational expenses without the benefits becoming taxable income to the employee. In addition, amounts paid under a Section 127 educational assistance program are generally deductible by the employer as a business expense.
In order to provide this benefit to employees, employers must have a written educational assistance plan that meets certain content requirements. The IRS issued these FAQs to provide general information to taxpayers and tax professionals – however, we will address only the information important to employers.
What is an educational assistance program?
An educational assistance program is a separate written plan of an employer for the exclusive benefit of its employees to provide employees with educational assistance.
To qualify as a Section 127 educational assistance program, the plan must be written and meet certain other requirements. An employer can tell its employees whether there is a Section 127 educational assistance program where they work.
A sample plan for employers is available. An employer may tailor its plan to include, for example, conditions for eligibility, when an employee’s participation in the plan begins and prorated benefits for part-time employees. However, a program cannot discriminate in favor of officers, shareholders, self-employed or highly compensated employees in requirements relating to eligibility for benefits.
What are educational assistance benefits?
Tax-free educational assistance benefits under a Section 127 educational assistance program include payments for tuition, fees and similar expenses, books, supplies and equipment. The payments may be for either undergraduate- or graduate-level courses. The payments do not have to be for work-related courses.
Tax-free educational assistance benefits also include principal or interest payments on qualified education loans (as defined in Section 221(d)(1) of the Code). Section 127 requires that such loans be incurred by the employee for the education of the employee and not for the education of a family member, such as a spouse or dependent. These payments must be made by the employer after March 27, 2020, and before Jan. 1, 2026 (unless extended by future legislation). The payments of any qualified education loan can be made directly to a third party, such as an educational provider or loan servicer, or directly to the employee, and it does not matter when the qualified education loan was incurred. A qualified education loan is generally the same as a qualified student loan. See Qualified Student Loan in Chapter 4 of Publication 970, Tax Benefits for Education.
Educational assistance benefits do not include payments for the following items:
- Meals, lodging or transportation.
- Tools or supplies (other than textbooks) that an individual can keep after completing the course of instruction (for example, educational assistance does not include payments for a computer or laptop that one keeps).
- Courses involving sports, games or hobbies unless they:
- Have a reasonable relationship to the business of the employer, or
- Are required as part of a degree program.
An employer may choose to provide some or all of the educational assistance described above. The terms of the plan may limit the types of assistance provided to employees.
What is a qualified education loan?
A qualified education loan (as defined in Section 221(d)(1)) is a loan for education at an eligible educational institution. Eligible educational institutions include any college, university, vocational school or other postsecondary educational institution as defined in Sections 221(d)(2) and 25A(f)(2). The Department of Education determines whether an organization is an eligible education institution. A loan does not have to be issued or guaranteed under a federal postsecondary education loan program to be a qualified education loan.
How can payments of qualified education loans be made?
In the case of payments made after March 27, 2020, and before Jan. 1, 2026 (unless extended by future legislation), depending on how a particular employer has designed its Section 127 educational assistance program, an employer may provide payments of principal or interest on an employee’s qualified education loans (as defined in section 221(d)(1) of the Code) for the employee’s own education directly to a third party, such as an educational provider or loan servicer, or make payments directly to the employee.
Generally, the payment by an employer of principal or interest on any qualified education loan incurred by the employee for the education of the employee under Section 127(c)(1)(B) is only available if an employer amends the terms of its plan to include the benefit. If the plan is currently written to provide generally for all benefits provided under Section 127, then it is possible that the plan would not need to be amended to provide for the qualified education loan benefit under Section 127(c)(1)(B).
Are employer payments of qualified education loans for spouses and dependents excluded from gross income under Section 127 of the Code?
Under Section 127 of the Code, an educational assistance program must be provided for the exclusive benefit of employees. A program that provides benefits to the spouse or dependents (as defined in Section 152) of an employee is not a Section 127 educational assistance program. Spouses and dependents of employees who are also employees, or spouses and dependents of owners who are also employees, may receive benefits under the program, but they are subject to a rule that prohibits discrimination in favor of these employees in requirements relating to eligibility for benefits and to a rule that limits the benefits that may be provided to them under the program to five percent of the benefits under the program.
Section 127 provides an exclusion from gross income for loan payments made by an employer after March 27, 2020, and before Jan. 1, 2026 (unless extended by future legislation), on a qualified education loan incurred by the employee for the employee’s own education. Thus, a payment of principal or interest by the employer on a loan incurred by an employee for the education of the employee’s spouse or dependent may not be excluded from the employee’s gross income. In addition, a payment by the employer on a loan incurred by the parent of an employee for the education of the employee may not be excluded from the parent’s or the employee’s gross income.
Can student debt be reimbursed under a Section 127 educational assistance program?
Student debt may consist of a variety of expenses. If the debt was incurred as a result of expenses that are permissible benefits under Section 127 of the Code—such as tuition, books, equipment, qualified education loans (in the case of payments made before Jan. 1, 2026, unless extended by future legislation)—the employer may reimburse the employee for these expenses as educational assistance benefits, and the employee could then use those funds to help satisfy the debt. To be excluded from the employee’s gross income, the employee must be prepared to substantiate the expenses to the employer.
Employer Takeaway
As employers look for ways to offer additional employee benefits or provide training to employees, education often becomes part of the compensation package. Employers may choose to structure education benefits in various ways to meet their goals and provide meaningful benefits to employees. Due to the tax rules involved, educational benefits require careful consideration to avoid unintended tax consequences; so employers should seek guidance from their tax advisors.
