Skip to main content
Article | Insider

PCORI fee due by August 2, 2021

Health and Benefits
N/A

By Anu Gogna and Benjamin Lupin | June 14, 2021

This Q&A covers the general requirements for filing the fee to help fund the Patient-Centered Outcomes Research Institute.

Under the Affordable Care Act, issuers of specified health insurance policies and self-insured health plan sponsors are required to pay a fee to help fund the Patient-Centered Outcomes Research Institute (PCORI). The fee is based on the average number of covered lives under the policy or plan and must be reported once a year on the second quarter IRS Form 720 and paid annually by July 31 (or the following business day if July 31 falls on a Saturday, Sunday or legal holiday).

The IRS announced in Notice 2020-84 that the PCORI fee amount for plan years ending on or after October 1, 2020, and before October 1, 2021, is $2.66 per covered life (up from $2.54 previously).

The following is a brief Q&A on the general requirements for filing the PCORI fee.

Q. When did the PCORI fee go into effect and when does it end?

A. The PCORI fee initially applied to specified health insurance policies and applicable self-insured health plans with policy or plan years ending after September 30, 2012, and before October 1, 2019; however, in December 2019 the fee was extended for an additional 10 years under the Further Consolidated Appropriations Act, 2020 and now applies through plan years ending before October 1, 2029.

Q. What types of plans are subject to the PCORI fee and how much is the PCORI fee?

A. The IRS has provided a chart on which types of insurance coverage or arrangements are subject to the PCORI fee as well as filing due dates and applicable rates, which depend on the month on which a specified health insurance policy or applicable self-insured health plan ends.

Q. Who pays the PCORI fee?

A. For fully insured plans, the insurance carrier is responsible for filing Form 720 and paying the PCORI fee; therefore, employers with only fully insured health plans have no filing requirement (but will be charged by the carrier for the cost of the fee). If an employer sponsors a self-insured health plan, the employer must file Form 720 and pay the PCORI fee. For self-insured plans with multiple employers, the named plan sponsor is generally required to file Form 720.

Q. How do you determine the average number of covered lives under the policy or plan to calculate the PCORI fee for the year?

A. The PCORI regulations require issuers of fully insured plans to use one of four alternative methods — (1) the actual count method, (2) the snapshot method, (3) the member months method, or (4) the state form method — to determine the average number of covered lives under a specified health insurance policy for a policy year.

Sponsors of self-insured plans must use one of three alternative methods: (1) the actual count method, (2) the snapshot method, or (3) the Form 5500 method.

The method used can be changed from year to year.

Q. Do COBRA-qualified beneficiaries and retirees or other former employees count as “covered lives” for purpose of calculating the PCORI fee?

A. These covered individuals and their beneficiaries must be taken into account in calculating the average number of covered lives.

Q. Can the PCORI fee be paid from plan assets? Is the PCORI fee deductible?

A. The U.S. Department of Labor has stated that the PCORI fee cannot be paid from plan assets. In other words, the PCORI fee must be paid out of the general assets of the employer plan sponsor. It is not a permissible expense of a self-insured plan and cannot be paid in whole or in part by participant contributions. Furthermore, the PCORI fee expense should not be included in the plan’s cost when computing the plan’s COBRA premium; however, the IRS has indicated the fee is a tax-deductible business expense for employers with self-insured plans.

Download
Title File Type File Size
Insider June 2021 PDF .3 MB
Authors

Senior Regulatory Advisor, Health and Benefits

Senior Regulatory Advisor, Health and Benefits

Related content tags, list of links Article Insider Health and Benefits Healthcare
Contact Us