PCORI Fee Reporting Self-Service Guide
The information below is intended to help guide employers and plan sponsors through the PCORI fee reporting process, including fees they may be subject to pay, and how to calculate and report those fees.
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. Healthcare reform imposes PCORI fees on certain health insurers and self-insured health plan sponsors.
Who pays the fee?
Insurance carriers pay the fee for fully-insured plans.
Plan sponsors (generally employers) pay 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 (Health FSAs), as long as the Health FSA is excepted from the Health Insurance Portability and Accountability Act (HIPAA), 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 apply.
Other benefits excepted from HIPAA 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.
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 it 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.
Quarterly Snapshot
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.
5500 Method
For the 5500 Method, use the number of participants reported for the beginning and end of the plan year on Form 5500. You report the average of the two 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.
When is the PCORI Fee due?
The Affordable Care Act mandated an annual PCORI fee payment from plans ending after September 30, 2012 and before October 1, 2019. The SECURE Act has extended the PCORI fee payment filings with plan years ending through 2029-2030, depending on your plan year end. The fee will continue to be due on July 31st of each year.
How much is the fee and how do I pay it?
Once you have this employee count, use 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.
How do I complete the form?
You can complete it by using the instructions on the form. Or, you could opt to have one of our qualified Benefit Consultants prepare the PCORI fee and complete the documents on your behalf to ensure compliance.
To complete IRS Form 720:
Fill in all of the general information fields 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.