Time to File and Submit Payment for the PCORI Fee
The Affordable Care Act (ACA) created the Patient Centered Outcome Research Initiative (PCORI) to evaluate and compare health outcomes. This initiative is partially funded by the PCORI fee, and it applies to all health plans, including church and government plans, which provide coverage to employees. The instructions may be found here.
Here’s what you need to know and do if you sponsor a self-insured group health plan.
Who and When?
- If a group health plan is fully-insured, the insurance carrier is responsible for reporting and paying the PCORI fee. Insurance carriers typically pass the fee along to covered employers through higher premiums.
- The employer as plan sponsor is responsible for reporting and paying the PCORI fee for a self-insured group health plan. A third party administrator (TPA) or other vendor may assist with the calculation, but the plan sponsor must file the IRS Form 720 and pay the applicable fee. If multiple employers participate in the plan, each must file separately unless the plan document designates one employer as the plan sponsor.
- IRS Form 720 and the PCORI fee are due by July 31, 2019.
- For calendar year plans and other plans with plan year ending dates after October 1, 2018 and before January 1, 2019 (generally, non-calendar year plans with plan years beginning November 1, 2017 or December 1, 2017), July 31, 2019 is the final PCORI reporting and payment date under the ACA.
- The final PCORI reporting and payment date for other non-calendar year plans is July 31, 2020.
Which Plans Are Subject to the PCORI Fee?
Most types of group health plans are subject to the PCORI fee, including group health plans that are considered “grandfathered” under the ACA as well as retiree-only coverage.It’s actually a little easier to describe which plans are excluded.
Plans that are excluded from the PCORI Fee
Plans considered “excepted” benefits under HIPAA
Expatriate insurance plans if the plan primarily covers employees working and residing outside the United States
Stop-loss or indemnity reinsurance policies
Non-group health coverage (e.g., life, disability, AD&D)
The indexed fee schedule is below.
For Plan Years…
Fee per Covered Life
How Do You Calculate the PCORI Fee?
The fee is based on the number of covered lives (i.e., employees, retirees, COBRA participants, and covered spouses and dependents). There are several options for calculating the fee. The goal is to find the method which results in the lowest fee owed. The same method must be used throughout a reporting year, but the employer may choose a different method from year to year.
- Actual Count Method. Count the covered lives on each day of the plan year, and average the result.
- Snapshot Count Method. Determine the number of covered lives on the same day (plus or minus 3 days) of each quarter or month, and average the result.
- Snapshot Factor Method. Using the same day (plus or minus 3 days) of each quarter or month, multiply the number of employees, retirees and COBRA participants who have elected a coverage tier other than self-only coverage by 2.35 (rather than actually counting dependents), and add that to the number of employees, retirees and COBRA participants with self-only coverage. Average the result.
- Form 5500 Method. Determine the number of participants at the beginning and end of the plan year as reported on Form 5500.
- If dependents are covered, add the participant count for the start and the end of the plan year.
- If dependents are not covered, add the participant count for the start and the end of the plan year and divide by two.
- The Form 5500 must actually be filed by July 31st for this option to be available.
If there are multiple self-insured plans with the same plan year (such as a self-insured medical plan with an HRA), only one fee is owed per covered life. In other words, there is no need to double-count the participants for overlapping coverage. Separate PCORI fees are owed for self-insured benefits with different plan years.
If the plan sponsor owes the fee for a health FSA or HRA on a standalone basis or it is integrated with fully insured coverage (such as a fully insured medical plan), the fee may be calculated by counting only one life per coverage participant. In other words, spouses and dependents do not need to be counted.
How Do We Report and Pay?
The fee is annually reported on IRS Form 720 by July 31st. Even though Form 720 is generally filed quarterly, the PCORI report and fee will just be filed once per year, at the end of the second quarter (unless the employer needs to file the form to report another tax).
Note: While government, church and not-for-profit plans don’t generally file federal tax returns, they are required to file the Form 720 if they sponsor a self-insured group health plan.
Only certain portions of Form 720 need to be completed for PCORI purposes:
- Identifying information at the beginning of the form:
- Part II, line 133 (self-insured plans complete the “Applicable self-insured plans”
line; the “Specified health insurance policies” line is completed by insurance carriers for fully insured policies):
- Part III, lines 3 and 10 and the signature section:
- Payment can be made electronically using the
Electronic Federal Tax Payment System or by check or money order using the 720-V payment voucher found near the end of the Form 720 and mailed to:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0009
The fee is tax-deductible.