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Compliance with the Affordable Care Act (ACA) mandates the requirement of the Patient-Centred Outcomes Research Institute (PCORI) fee for certain health plans. Ignoring or not filing this requirement can lead companies to incur penalties, interest, and compliance issues with the IRS. We'll discuss how not paying the PCORI fee incurs penalties, which is liable, and how to comply and avoid sitting in unwanted legal trouble.

The PCORI fee is a fee paid by issuers of specified health insurance policies and sponsors of self-insured health plans that are subject to regulation under the law. Research projects and studies funded by the fee will yield recommendations on the most appropriate and reliable evidence patients or health care providers will use for scaling their health decisions. Businesses must file IRS Form 720 annually and pay the correct amount due by July 31 of each year for the previous plan year.

If the PCORI fee were not paid or if Form 720 are not filed at the right time, such action may trigger the penalties and enforcement measures of the Internal Revenue Service (IRS). The worst consequences are:

Late payment penalties on the unpaid tax amount

Interest accrual against a balance not paid

IRS-formatted notices and audits for non-compliance

Potential denial as a compliant plan sponsor or insurer

The IRS may levy a 5 percent failure-to-file penalty for each month the return is late against the unpaid tax, up to 25. With a failure-to-pay penalty of 0.5 percent per month.

The employer with a self-insured health plan is likely to answer the PCORI fee. Health insurance providers must also comply, especially for those selling fully insured plans. Misunderstanding the classification puts organizations at risk of IRS violation-level mistakes that are financially costly.

Avoid IRS penalties for non-compliance regarding PCORI by doing the following:

Correctly determine the plan type and whether you have an obligation to file

Correctly file Form 720 in a timely manner

Determine the right amount of PCORI fees through the IRS's applicable fee rates

Preserve notices for your plan participants and policy periods

Use payroll providers or tax professionals to help facilitate the process

Staying ahead of the game will keep your organization out of federal tax problems, compliance dangers, and audits.

It is a bad gamble to ignore or forget the responsibility to pay the PCORI fee. It is prudent for any organization to scrutinize its progress in fulfilling duties imposed by the ACA, especially with the increased scrutiny the IRS is giving compliance to the provisions. Importantly, with increased enforcement, penalties for non-payment of the PCORI fee can really pile up quickly. Ensure your health plan is compliant, timely filed, and properly documented to avoid penalties within your business or client.