PCORI Fees Due July 31, 2024
| The Affordable Care Act (ACA) requires health insurance issuers and self-insured plan sponsors to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). The fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). Originally, the fee was to last only 6 years, with calendar-year plans making their final payment in 2023. However, in a spending bill passed by Congress in late 2019, the PCORI fee was extended to 2029. Issuers and plan sponsors are generally required to pay the PCORI fees annually by July 31 of each year. However, the PCORI fee payment for plan years ending in 2022 is due July 31, 2024. Who Must Pay the PCORI Fees? The entity responsible for paying the PCORI fees depends on whether the plan is insured or self-insured. For insured health plans, the issuer of the health insurance policy is required to pay the fees. For self-insured health plans, the fees are to be paid by the plan sponsor. The Department of Labor (DOL) has advised that, because the PCORI fees are imposed on the plan sponsor under the ACA, it is not permissible to pay the fees from plan assets under the Employee Retirement Income Security Act (ERISA), although special circumstances may exist in limited situations. When two or more related employers provide health coverage under a single self-insured plan, the employer responsible for the PCORI fees is the one designated in the plan documents as the plan sponsor (or as the plan sponsor for purposes of reporting the PCORI fees). If this designation is not made, then each employer is required to report and pay PCORI fees with respect to its own employees. What Policies and Plans Are Subject to PCORI Fees? The PCORI fees generally apply to insurance policies providing accident and health coverage and self-insured group health plans. The PCORI fee may apply to retiree-only plans even though retiree-only coverage is exempt from many of the ACA’s other requirements. The IRS provides this table showing which type of plans are subject to the fee: Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements. Special Rules for HRA and FSA Health reimbursement arrangements (HRAs) – including individual coverage health reimbursement arrangements (ICHRAs) – and health flexible spending accounts (health FSAs) are not completely excluded from the obligation to pay PCORI fees. However, two special rules apply for plan sponsors that provide an HRA or health FSA. Under these special rules: If a plan sponsor maintains only an HRA or health FSA (and no other applicable self-insured health plan), the plan sponsor may treat each participant’s account as covering a single life. This means that the plan sponsor is not required to count spouses or other dependents. An HRA is not subject to a separate PCORI fee if it is integrated with another self-insured plan providing major medical coverage, provided the HRA and the plan are established and maintained by the same plan sponsor and have the same plan year. This rule allows the sponsor to pay the PCORI fee only once with respect to each life covered under the HRA and other plan. However, if an HRA is integrated with an insured group health plan, the plan sponsor of the HRA and the issuer of the insured plan will both be subject to the PCORI fees, even though the HRA and insured group health plan are maintained by the same plan sponsor. How Much Are the PCORI Fees? The PCORI fees are based on the average number of covered lives under the plan or policy. The amount of the fee will vary depending upon the date on which the policy year ends. |
| Are the PCORI Fees Deductible? According to the IRS, the required PCORI fee is an ordinary and necessary business expense paid or incurred in carrying on a trade or business and, therefore, is deductible under Code Section 162. What Action Should Employers Take? Self-funded plan sponsors are familiar with this annual process. If this is the first year that your health plan is subject to the fee, or for a brief refresher, see the steps below. FUNDING STATUS: Assess plan funding status (insured vs. self-funded) to determine whether the employer or a health policy issuer is responsible for the fees. PLANS SUBJECT TO FEE: Determine which plan(s) are subject to the PCORI fee. The fee generally applies to insurance policies providing accident and health coverage and self-insured group health plans. The IRS provides this table showing which type of plans are subject to the fee: Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements. SELF-FUNDED PLAN: Self-funded plan sponsors should select a covered lives count method and calculate the total fee based on the count and the applicable fee. The PCORI fee is based on the number of employees, spouses, and dependents that are covered by the plan. The employer may use the actual count method, snapshot method (and snapshot factor sub-method) or Form 5500 method to determine the average number of covered lives. The IRS Final Regulations provide details on the covered lives count methods. The IRS provides this table showing the fee schedule: Filing Due Dates and Applicable Rates. REPORT & PAY: Report and pay the PCORI fees annually using IRS Form 720 and Form 720 Instructions. The IRS provides helpful FAQs on the PCORI Fee. |
