Transitional Reinsurance Fee (TRF)

FAQ About the 2016 Transitional Reinsurance Fee

 

_rba_color_logo_full
Frequently Asked Questions about the

Transitional Reinsurance Fee (TRF)

October 2016

 

The transitional reinsurance fee (TRF) applies to fully insured and self-funded major medical plans for 2014, 2015, and 2016. The purpose of the fee is to provide funds to help stabilize premiums in the individual insurance market in view of uncertainty about how the Patient Protection and Affordable Care Act (ACA) would affect claims experience. While insurers are responsible for reporting and paying the fee on the policies they issue, the fee will generally be passed on to the employer. Plan sponsors of self-funded plans (or their representatives) must report and pay the fee to the federal government at www.pay.gov.

Q1: What plans does the TRF apply to?

A1: All plans that provide primary major medical coverage to employees or retirees owe this fee. Major medical coverage includes medical plans that provide minimum value (that is, have an actuarial value of 60 percent or more) and all medical policies provided through the Marketplace. If the employer uses multiple separate plans or policies that collectively provide major medical coverage, one fee is due on that combined coverage.

The fee does not apply to:

  • Medical coverage if the employer or retiree plan is secondary
  • Medical coverage that does not provide minimum value, such as a “skinny” plan
  • Stand-alone dental and vision plans (stand-alone means these benefits are elected separately from medical, or the benefits are provided under separate insurance policies from the medical coverage)
  • Life insurance
  • Short- and long-term disability and accident insurance
  • Long-term care
  • Health flexible spending accounts (FSAs)
  • Health savings accounts (HSAs)
  • Health reimbursement arrangements (HRAs)
  • Hospital indemnity or specified illness coverage

 

  • Employee assistance programs (EAPs) and wellness programs that do not provide major medical coverage
  • Stop-loss coverage

Q2: Does the fee apply to all types of plan sponsors?

A2: There are no exceptions for small employers. There are no exceptions for government, church or not-for-profit plans. Grandfathered plans owe this fee. Union plans must pay the fee on their covered members. However, self-funded plans that are self-administered (that is, they do not use a third party vendor to process claims or eligibility) are exempt from the filing and fee for 2015 and 2016.

Q3: Who must pay this fee?

A3: The fee must be determined and paid by:

  • The insurer for fully insured plans
  • The plan sponsor of self-funded plans (this is typically the employer for a single-employer plan and the board or committee for a multiemployer plan). The plan’s third-party administrator (TPA) may assist with the calculation and pay the applicable fee on behalf of the plan sponsor.

Q4: When is the TRF filing due?

A4: The TRF filing is due by December 5, 2014, November 16, 2015, and November 15, 2016. (The due date is the same for both calendar year and non-calendar year plans.) Originally, the 2014 filing was due on November 15, 2014, but that deadline was extended.

Q5: When is the fee due?

A5: Employers and insurers may pay the fee in one installment, by January 15, 2015, January 15, 2016, and January 17, 2017, or in two installments each year. If paid in installments, the larger installment will be due January 15, and the smaller installment will be due the following November 15. For example, if the 2014 fee is paid in installments, $52.50 per person will be due January 15, 2015, and $10.50 per person will be due November 15, 2015.

For the 2014 benefit year, the second payment was due no later than November 15, 2015.

For the 2015 benefit year, it can be paid in one payment, due by January 15, 2016, or in two payments, the first by January 15, 2016, and the second by November 15, 2016. Although the fees are due in January 2016 and November 2016, information and payment scheduling is due by November 16, 2015.

For the 2016 benefit year, it can be paid in one payment, due by January 17, 2017, or in two payments, the first by January 17, 2017, and the second by November 15, 2017. Although the fees are due in January 2016 and November 2016, information and payment scheduling is due by November 15, 2016.

Q6: How much is the fee?

A6: The annual fee was $63.00 per covered life for 2014. The fee was $44.00 per covered life for 2015. The fee is $27.00 per covered life in 2016.

The fee is based on covered lives (that is, employees, retirees, and COBRA participants and covered spouses and children).

Q7: What if the plan terminates?

A7: The fee is due for each calendar year the plan was in effect for all or part of the year.

Q8: What if the plan switches between fully insured and self-funded status during the year?

A8: If a plan moves between fully insured and self-funded status, the carrier will owe the fee for the period it provided coverage and the plan sponsor will owe the fee for the period the plan is self-funded. Since reporting is only based on January through September coverage, a May 1 change would cause the entity that provided coverage from January through April to pay four-ninths of the fee.

Example: Zinc Corporation has a fully insured plan from January 1, 2016, through April 30, 2016, and is self-funded from May 1, 2016, through December 31, 2016. The insurance company is responsible for paying the fee from January 1 through April 30. Zinc is responsible for paying the fee from May 1 through September 30. Zinc uses the actual count method (described in Question 10) and will measure its obligation as follows:

January 2016                0 total covered lives

February 2016               0 total covered lives

March 2016                   0 total covered lives

April 2016                     0 total covered lives

May 2016               9,100 total covered lives

June 2016               9,150 total covered lives

July 2016                9,000 total covered lives

August 2016           9,250 total covered lives

September 2016     9,150 total covered lives

Zinc is responsible for 45,650 total lives for 2016 divided by 273 total days from January through September; for 167.21611 lives, on average, for the year. The lives are rounded to the nearest hundredth and multiplied by $27.00, for a total of $4,514.94 due.

Q9: What if a plan is new?

A9: The fee will be due for each month the plan is in effect. The rate for that calendar year will apply.

For example, if the plan begins January 1, 2016, the first fee will be $27.00 per covered life and the first filing will be due on November 15, 2016. If the plan began April 1, 2016, the fee will apply for April 1, 2016, through December 31, 2016, based on average covered lives from April through September, and the first filing will be due November 15, 2016.

Q10: How is the fee calculated?

A10: Plan sponsors of self-funded benefits have several options to calculate the number of lives on which the fee is based. The snapshot factor method may only be used if all plan options are self-funded. Results should be rounded to the nearest hundredth:

  • Actual Count Method – Count the covered lives on each day of the first nine months of the calendar year, and divide by the number of days in the first nine months. This average number will be multiplied by $27.00 to determine the fee for 2016.
  • Snapshot Count Method – Determine the number of covered lives on dates during the first three quarters of the calendar year, and divide the total by the number of dates on which a count was made. The measurement date must be the same corresponding month in each quarter, and dates for the second and third quarters must be in the same week of the month as was used for the first quarter. An entity may use more than one measurement date per quarter if an equal number of dates are used for each quarter.

Example: Acme has chosen to measure on the first calendar day of each quarter. On January 1, 2016, it had 127 covered lives on its plan. On April 1, 2016, it had 130 covered lives. On July 1, 2016, it had 132 covered lives. On October 1, 2016, it had 128 covered lives. Acme will report lives to the federal government by November 15, 2016 (127 + 130 +132 = 389. Dividing by 3 gives an average of 129.67, which will be multiplied by $27.00 to determine the fee for 2016. The October 1 count is disregarded.

  • Snapshot Factor Method – Determine the number of covered employees, retirees, and COBRA participants on dates during the first three quarters of the calendar year who have self-only coverage and the number who have other than self-only coverage. The measurement date must be the same corresponding month in each quarter, and dates for the second and third quarters must be in the same week of the month as was used for the first quarter. An entity may use more than one measurement date per quarter if an equal number of dates are used for each quarter.

Also multiply the number of employees, retirees, and COBRA participants with other than self-only coverage by 2.35 to approximate the number of covered dependents (rather than actually counting them), and add that to the number of employees, retirees, and COBRA participants with self-only coverage. Divide the total by the number of dates on which a count was made.

Example: Blackstone has chosen to measure on the first workday of each month. Its covered employees are:

January 1, 2016         50 (self-only) and 40 (other than self-only)

February 1, 2016        50 (self-only) and 40 (other than self-only)

March 1, 2016            52 (self-only) and 42 (other than self-only)

April 1, 2016              53 (self-only) and 41 (other than self-only)

May 1, 2016               54 (self-only) and 40 (other than self-only)

June 3, 2016              53 (self-only) and 42 (other than self-only)

July 1, 2016               54 (self-only) and 42 (other than self-only)

August 1, 2016          49 (self-only) and 40 (other than self-only)

September 3, 2016     48 (self-only) and 41 (other than self-only)

For the first nine months of the year, Blackstone has a total of 463 self-only employee lives and 368 other than self-only employee lives. Blackstone will multiply the 368 by an assumed 2.35 dependents per employee, for total of 864.8 employee/dependent covered lives. Add 463 and 864.8 for 1,327.8 total lives and divide by 9 for the average number of lives. Blackstone will owe $3,983.31 [1,327.8 divided by 9 gives an average of 147.5333, which will be rounded to 147.53 (the nearest hundredth) and multiplied by $27.00].

  • Form 5500 Method – Determine the number of participants at the beginning and end of the plan year as reported on the most recent Form 5500.
  • If dependents are covered, add the participant count for the start and the end of the plan year (to approximate the total number of covered employee and dependent lives).

Example: Smith Bros. has a May 1 plan year. Smith’s plan covers dependents. Smith’s Form 5500 for the plan year May 1, 2015, through April 30, 2016, showed 131 participants at the beginning of the year and 137 participants at the end of the year. Smith will owe $7,236 ([131+137] x $27.00).

  • If dependents are not covered, add the participant count for the start and the end of the plan year and average the result.

Example: Taylor Trucking has a March 1 plan year. Taylor’s plan does not cover dependents. Taylor’s Form 5500 for the plan year March 1, 2015, through February 29, 2016, showed 450 participants at the beginning of the year and 461 participants at the end of the year. Taylor will owe $12,298.50 (450 + 461 = 911. Divide by 2, to get 455.5 and multiply by $27.00.)

  • The Form 5500 must be filed by October 15 to use this option.

Q11: May an employer adjust its count for employees terminated during the fourth quarter?

A11: An employer may not adjust its count for terminations during the fourth quarter, even if this is an unusually large number.

Q12: May an employer change its calculation method?

A12: The same method must be used throughout a calendar year, but it may be changed from year to year.

Q13: May an employer use a different calculation for the Patient Centered Outcomes Research Institute (PCORI) fee and this fee?

A13: Yes, the employer may use different methods for these two fees.

Q14: What if the employer sponsors multiple medical plans?

A14: If there are multiple plans, only one fee would apply to a covered life. The plan that provides primary major medical coverage (generally defined as minimum value coverage) is primarily responsible. (If the employer is unable to easily determine which individuals are receiving secondary coverage, it may simply pay the fee on all lives covered by the major medical plans it sponsors.)

If the plan offers multiple major medical options, the employer may report all lives through an aggregate filing, or it may file separately for each plan option. The employer must use the same counting method for all plan options.

If the employer offers multiple separate medical plans that together provide major medical coverage, the employer should report based upon the coverage that provides minimum value coverage. If no coverage is minimum value, the coverage that provides the most inpatient hospital coverage should be used.

Q15: How is the fee paid?

A15: The fee will be reported and paid through www.pay.gov. When the entity reports the number of covered lives (by November 15) the employer will provide account information and choose a payment date. The fee will be electronically withdrawn by the government on the chosen payment date.

Q16: What if company policy does not allow release of bank account information?

A16: The Department of Health and Human Services (HHS) has stated that, while it understands concerns about providing this information, at this time an ACH “pull” is the only method of paying the TRF. Entities may wish to authorize their bank to only recognize this one type of transaction. In contrast, if this “pull” is illegal (as is the case for a few governmental agencies) the employer should contact HHS through Reinsurancecontributions@cms.hhs.gov for further direction.

Q17: Do any steps need to be taken to be sure the bank honors this transaction?

A17: Automatic debits to a business account are sometimes blocked by the bank. This security feature is called an ACH Debit Block, ACH Positive Pay, or ACH Fraud Prevention Filter. An ACH Debit Block is removed by providing an allowed list of ACH codes; this list enables allowable automatic debits.

When working with the U.S. Government, these codes are referred to as the Agency Location Code (ALC). Entities may wish to contact their bank to have the ALC added to a list of approved automated debit transactions.

There is an updated ACH Debit Block Number for the 2016 Benefit Year Reinsurance Contribution Submission Process; the RI contribution ALC+2 number for the 2016 Benefit Year only is 7505008016.

Q18: May the fee be paid from plan assets?

A18: Yes. The Department of Labor (DOL) has confirmed that the fee is a valid plan expense under ERISA and, therefore, it may be paid from plan assets. Plans that are not governed by ERISA, like church and government plans, may wish to confirm that this expense is properly payable under the rules that apply to them.

Q19: Is the fee tax-deductible?

A19: Yes, the fee is tax-deductible as a business expense.

Q20: Is record-keeping required?

A20: Yes, the contributing entity must maintain paper or electronic records to substantiate the enrollment count on which the fee is based for at least 10 years. No particular format or information is required.

Q21: How is the filing made?

A21: The filing is made through www.pay.gov. The filing process was operational as of October 24, 2014, and the 2016 Submission Form was made available on October 3, 2016. The Centers for Medicare & Medicaid Services (CMS) has provided an in-depth step-by-step manual which was most recently updated on April 27, 2016. It has also provided a job aid to assist with the file layout and other technical aspects of the required supporting documentation. The process allows for the plan sponsor to directly file and pay just for its own plan, or to have a third party file and pay on behalf of multiple plans. This makes some parts of the process redundant in certain situations. Essentially, the process is:

  • If the Reporting Entity does not yet have a pay.gov account, it must register at pay.gov.
  • Once registered, the entity completes the “ACA Transitional Reinsurance: Annual Enrollment Contributions Submission Form.” It is important to note that there is a specific form for each benefit year.
  • The Reporting Entity uploads the needed Supporting Documentation in a comma-separated value (CSV) file.
  • The required banking information is provided and the contribution payment date is scheduled.

Q22: What information is needed to complete the filing?

A22: To complete the filing the organization will need:

  • The legal business name (LBN), federal tax identification number (TIN), and full billing address (which cannot be a post office box) of the Reporting Entity
  • The name, title, email, and phone number of the billing contact at the Reporting Entity
  • The Reporting Entity’s billing address, including address, city, state, and ZIP code.
  • The name, title, email, and phone number for a submission contact at the Reporting Entity (that is, individuals that HHS may call if it has questions about the filing)
  • The 2016 annual enrollment count (calculated using one of the methods described in Q&A 10 of this FAQ)
  • Supporting documentation, if applicable (CSV file of supporting data, if applicable)
  • The name, title, email, and phone number for the “authorizing official” (that is, an officer or other high-ranking individual at the Reporting or Contributing Entity who has the authority to approve the payment)
  • The account holder name, account type (checking or savings), bank routing (ABA) and bank account numbers for the account the fee will be made from

Note that the health plan identifier (HPID) is not needed for this filing. Also, as an update for 2016, when completing the form, the Billing Contact and Contact for Submission must be different.

Q23: Who is the “Reporting Entity” and who is the “Contributing Entity”?

A23: The Reporting Entity is the organization actually doing the filing. The Contributing Entity is the organization that sponsors the plan and actually owes the fee. If the plan is doing its own filing, the Reporting Entity and Contributing Entity will be the same.

Q24: How does a plan sponsor complete the process?

A24: A plan sponsor will need to do the following.

Before Getting Started

  1. Calculate your Annual Enrollment Count using one of the approved counting methods.
  2. Prepare Supporting Documentation, if you are reporting for four or more Contributing Entities.

Navigate to the 2016 Form on Pay.gov

  1. Go to the Pay.gov website at https://www.pay.gov/.
  2. Select Log in to log in with your Username and Password. If you do not have an existing account with Pay.gov, select Register to create an account.
  3. In the Search box at the top of the Home page, search for 2016 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form.
  4. On the Search Results page, navigate to the 2016 ACA Transitional Reinsurance Program Annual Enrollment Contributions section and select Continue to the Form.
  5. On the Acknowledgment of Accepted Payment Methods page, select Continue to the Form to acknowledge the accepted payment method of Bank Account (ACH).

You can select the blue question marks (?) throughout the form for more information. The Save and PDF Preview buttons will let you save and check your progress.

Complete Contact Information

  1. On the Contact Information page, enter required information (indicated by an asterisk).
  2. Answer the question, “Are you reporting for three (3) or fewer Contributing Entities using this Form?” by selecting Yes or No. Then select Yes or No to answer the question, “If yes, are you both the Reporting Entity and Contributing Entity for this Form submission?”
  3. Select Continue to continue with the 2016 Form.

Complete Contributing Entity Information

  1. If you selected Yes for the question, “Are you reporting for three (3) or fewer Contributing Entities using this Form?” then complete these steps:
  2. a)  Select the Organization Type (For Profit or Nonprofit) from the dropdown list.
  3. b)  Select the Domiciliary State from the dropdown list.
  4. c)  Enter the Annual Enrollment Count for the applicable benefit year.
  5. d) Select the Type of Contributing Entity from the dropdown list.

If applicable, select the radio button next to Contributing Entity 2 and Contributing Entity 3 to enter information, and select Continue.

  1. If you selected No for the question, “Are you reporting for three (3) or fewer Contributing Entities using this Form?” the second question does not apply. Select Continue to proceed to the Contributions Information section.

Complete Contributions Information

  1. Select the Type of Filing: New, Re-Filing, or Resubmission. Even if you filed a Form in 2014 or 2015, you will need to select New for the 2016 Form the first time you submit a 2016 Form.
  2. If you selected New or Re-Filing as the Type of Filing, the Payment Question is required. Answer Yes or No to the question, “Do you want to make the Full Contribution for 2016 in one payment?”
  3. a)  If you selected Yes for the Payment Question, then go to Step 3.
  4. b)  If you selected No for the Payment Question, select one of the following options to the follow-up question: “If No, select one of the two payments for which you are filing this Form.”

(1) First Collection – $21.60 per covered life. (Regulatory Payment Due Date – January 17, 2017)

(2) Second Collection – $5.40 per covered life. (Regulatory Payment Due Date – November 15, 2017)

  1. If you selected New as the Type of Filing, complete one of the following steps.
  2. a) If reporting for three or fewer Contributing Entities, the sum of Annual Enrollment Counts will pre-populate from the Contributing Entity Page. Enter the sum of Annual Enrollment Counts in the Verify the Annual Enrollment Count
  3. b) If reporting for four or more Contributing Entities, enter and verify the sum of Annual Enrollment Counts from the Supporting Documentation (.CSV file).
  4. c) The 2016 Form will pre-populate the remaining information based on the Annual Enrollment Count.
  5. If you selected Re-Filing as the Type of Filing, answer the Payment Questions, enter and verify the Annual Enrollment Count, and enter your Previous Pay.gov Tracking ID. The 2016 Form will pre-populate the remaining information based on the Annual Enrollment Count.
  6. If you selected Resubmission as the Type of Filing, enter your Previous Pay.gov Tracking ID, and enter and verify your Annual Enrollment Count at the bottom of the 2016 Form.
  7. Select the checkboxes to confirm that the Annual Enrollment Count entered matches the sum of Annual Enrollment Count by entity in the Supporting Documentation, if applicable, and acknowledge and certify that all entered data are true.
  8. Enter the Authorizing Official for Reporting Entity’s Acknowledgment contact information.
  9. Select Continue to continue with the 2016 Form. A pop-up window will display a message reminding you to change the Payment Date on the Payment page.

Upload Supporting Documentation (If Applicable)

If you answered Yes to the question, “Are you reporting for three (3) or fewer Contributing Entities using this Form?” you will not be directed to this page and can continue to the Payment page.

If you answered No to the question, “Are you reporting for three (3) or fewer Contributing Entities using this Form?”:

  1. Select the Browse button to search for your Supporting Documentation and select your file.
  2. Select the Attach button to attach it to the 2016 Form.
  3. When you have attached the file, select Next.

Complete Payment Information

  1. On the Payment page, use the calendar feature to select a Payment Date, enter the Account Holder Name, select “I want to enter a new account,” and select the Account Type.
  2. Enter the Routing Number, enter and confirm the Account Number, and select Review and Submit Payment.

Review and Submit Payment

  1. Review your Payment and Account Information.
  2. If you wish to receive an email confirmation of your transaction, select the checkbox and enter and confirm your email address.
  3. Review the Pay.gov Authorization and Disclosure Statement, select the checkbox to agree to the statement, and select the Submit Payment
  4. Review your Payment Confirmation. You may view the payment on the Payment Activities page, view the 2016 Form in the My Forms page, and Print a Receipt.

Note: Automatic debits to a business account may be blocked by the bank through a security feature called an ACH Debit Block, ACH Positive Pay, or ACH Fraud Prevention Filter. To remove the ACH Debit Block, an organization must provide a list of allowed ACH Company IDs to enable automatic debits from authorized companies. When working with the U.S. Government, these ACH Company IDs are referred to as the Agency Location Code (ALC+2). Contributing Entities must contact their bank to add the ALC+2 to their list of allowed ACH company IDs for debit transactions. The Transitional Reinsurance Program’s ALC+2 is 7505008016 and the company name is USDEPTHHSCMS.

Q25: How does a Reporting Entity create a duplicate form?

A25: A duplicate Form is needed if the entity will pay the fee in two installments. To create a duplicate form:

  • Log in to pay.gov
  • Select My Account in the upper right of the page
  • Under My Forms, select View My Forms
  • Click on the Duplicate link on the right side of the page
  • Select the Submitted tab, locate the form to be duplicated, and select Duplicate
  • Review the reporting form, make any needed changes and select Continue
  • Under the Type of Payment, select the checkbox next to Second Collection
  • Attach the same Supporting Documentation as with the First Collection filing
  • Select a date for payment of the second installment of the fee (not later than November 15, 2017)

Q26: What if there is an error in the submission or other information changes?

A26: Any change to contact or billing information should be emailed to the CMS Transitional Reinsurance Program Support Mailbox (Reinsurancecontributions@cms.hhs.gov). Other changes may be made by resubmitting the form.

Q27: Is additional help available?

A27: Yes, help is available from several places:

Q28: Is there a quick reference guide for due dates?

A28: Yes. The 2016 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form’ (2016 Form) was available via https://www.pay.gov/ on Monday, October 3, 2016.

Key reinsurance contribution deadlines for the 2016 benefit year:

Date Activity Contribution Amount
To make a full contribution in one payment (combined collection):
File no later than November 15, 2016 Submit the Form and schedule payment
Remit no later than January 17, 2017 Full contribution amount due (single payment): $27.00 per covered life
Total $27.00 per covered life
OR
To make a full contribution in two payments (first and second collection):
File no later than November 15, 2016 Submit the Form and schedule payment of first collection contribution and duplicate the Form and schedule payment of second collection
Remit no later than January 17, 2017 First contribution amount due $21.60 per covered life
Remit no later than November 15, 2017 Second contribution amount due $  5.40 per covered life
Total $27.00 per covered life

 

Key reinsurance contribution deadlines for the 2015 benefit year

Date Activity Contribution Amount
To make a full contribution in one payment (combined collection):
File no later than November 16, 2015 Submit the Form and schedule payment by due date
Remit no later than January 15, 2016 Full contribution amount due (single payment): $44.00 per covered life
Total $44.00 per covered life
OR
To make a full contribution in two payments (first and second collection):
File no later than November 16, 2015 Submit the Form and schedule payment of first collection contribution (by due date) and duplicate the Form and schedule payment of second collection (by due date)
Remit no later than January 15, 2016 First contribution amount due $33.00 per covered life
Remit no later than November 15, 2016 Second contribution amount due $11.00 per covered life
Total $44.00 per covered life

 

 

 

Key reinsurance contribution deadlines for the 2014 Benefit Year

Date Activity Contribution Amount
To make a full contribution in one payment (combined collection):
File no later than December 5, 2014 Submit the Form and schedule payment by due date
Remit no later than January 15, 2015 Full contribution amount due (single payment): $63.00 per covered life
Total $63.00 per covered life
OR
To make a full contribution in two payments (first and second collection):
File no later than December 5, 2014 Submit the Form and schedule payment of first collection contribution (by due date) and duplicate the Form and schedule payment of second collection (by due date)
Remit no later than January 15, 2015 First contribution amount due $52.50 per covered life
Remit no later than November 15, 2015 Second contribution amount due $10.50 per covered life
Total $63.00 per covered life

 

 

10/13/2016

This information is general and is provided for educational purposes only. It is not intended to provide legal advice.
You should not act on this information without consulting legal counsel or other knowledgeable advisors.

 

We bring personalized, comprehensive benefits coverage to employees