PCORI Fee Reporting Self-Service Guide
As the July 31, 2016 deadline nears, you may be hearing a lot about PCORI Fees. To assist employers and plan sponsors, BPC has put together this guide to help you understand PCORI Fees, fees you may be subject to pay, and how to calculate and report them accurately.
The Patient-Centered Outcomes Research Institute (PCORI) was created by the Affordable Care Act (ACA) to support clinical effectiveness research and is funded in part by fees paid by health insurance carriers and health plan sponsors. Health care reform imposes PCORI fees on certain health insurers and self-insured health plan sponsors. When fees apply, employers or health insurers are required to report and make a payment by July 31 of the year following the applicable plan year. Below are answers to commonly asked questions regarding PCORI Fees.
Who pays the fee?
- Insurance carriers pay the fee for fully insured plans.
- Plan sponsors, which is generally the employer, pays the fee for self-funded plans including Health Reimbursement Arrangements (HRAs).
What plans are subject to the fee?
- Most HRAs, including those integrated with a fully insured plan or a retiree-only plan. The plan sponsor pays the fees related to the HRA and the insurance company will pay the fees related to the insured plan.
- Self-insured health plans and health insurance policies, including plans and policies providing coverage only to retirees.
What plans are not subject to the PCORI fee?
- Health Flexible Spending Accounts (FSAs), as long as the Health FSA is excepted from the Health Insurance Portability and Accountability Act (HIPPA), are not subject to the PCORI fee. Most Health FSA’s are excepted benefits, provided that other group health coverage providing at least minimum essential coverage is available to all participants, and employer contributions do not exceed $500 (or a dollar for dollar match). If a Health FSA is not a HIPAA-excepted benefit, PCORI fees may be owed.
- Other benefits excepted from HIPPA such as limited-scope dental and vision plans.
- Employee assistance, disease management, and wellness programs that do not provide significant benefits in the nature of medical care or treatment.
- Health Savings Accounts (HSAs).
When is the PCORI Fee due?
PCORI fees must be reported and paid for no later than July 31 of the calendar year following the end of the plan year.
How are the number of covered lives for HRAs and Health FSAs determined?
HRAs are permitted to assume one covered life for each employee participating in an HRA, disregarding any spouse or dependents, if the HRA is offered with a fully insured health plan. In rare cases where an HRA is offered as a standalone plan (such as a retiree-only plan which is not integrated with any other coverage), this one life per employee method is also acceptable.
If the HRA is integrated with a self-funded health plan, the plan sponsor may treat them as a single plan and count the number of covered lives, which would include covered spouses and dependents. Self-funded plans are not required to use the same counting method each year or use the same approach for each plan. Other counting options are available for issuers with respect to fully insured plans.
For the Quarterly Snapshot Method, count the covered lives on the same day of each quarter. (Example: The first day of each quarter.) You will report the average number of the four counts. BPC HRA and FSA clients can login to their accounts to access Monthly Account Analysis Reports which will provide the employee count information. These reports are saved for three years.
For the 5500 Method, use the number of participants reported for the beginning and end of the plan year on Form 5500. You will report the average of the 2 numbers.
Actual Count Average Method
Count the number of actual lives on each day of the plan year, and the average of all daily counts is reported.
How much is the fee and how do I pay it?
Once you have this employee count, use the PCORI Fee Grid below to calculate the amount to pay and report on IRS Form 720. Although Form 720 is filed quarterly for most other federal excise taxes, the PCORI fee reporting and payment are only required annually, on the second-quarter filing, due July 31.
How do I complete the form?
You may complete the form using the instructions on the form. A second option would be to have one of BPC's qualified Benefit Specialists calculate the PCORI fee and complete the documents on your behalf to ensure compliance. Click here to learn more.
If you complete Form 720 yourself, take the following steps:
- Complete the general information at the top of page 1.
- The PCORI fee is reported on page 2 of the Form, under Part II. Sponsors should report the number of covered lives in column a, and multiply by the rate in column b. Then, fill in the total at the bottom of Part II.
- Sign and date the form at the bottom of page 2.
- Send the Form 720 and the Form 720-V Payment Voucher with payment to the
appropriate IRS office listed in the instructions.