The Patient-Centered Outcomes Research Institute (PCORI) fee is an ACA fee that helps fund research regarding the effectiveness of medical treatments so that patients, clinicians, purchasers, and policy-makers can make informed health decisions. The PCORI fee applies to plan years ending on or after 10/1/2012 and before 10/1/2019.
The deadline for the PCORI fee is fast approaching — all fees must be paid by 7/31/2017. To determine whether your company is required to pay the fee, please refer to the section below titled “Who is Responsible for Paying the PCORI Fee?”
How much is the PCORI fee?
The PCORI fee is calculated by multiplying the average number of lives covered during the plan year by the applicable dollar amount for the year. For plan years ending on or after 10/1/2015 and before 10/1/2016, the applicable dollar amount is $2.17. For plan years ending on or after 10/1/2016 and before 10/1/2017, the applicable dollar amount is $2.26.
Plan sponsors may determine the average number of lives using one of three methods:
- Actual count method: add the total lives covered for each day of the plan year and divide that total by the number of days in the plan year.
- Snapshot method: add the total number of lives covered on one date during the first, second, and third month of each quarter, and divide that total by the number of dates on which a count was made. Each date used for the second, third, and fourth quarter must be within three days of the date in that quarter that corresponds to the date used in the first quarter.
- Form 5500 method: the average number of lives is based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.
If an employer has a third-party administrator (TPA) for an eligible plan, the TPA typically assists in determining the average number of lives covered during the plan year.
Who is responsible for paying the PCORI fee?
- Self-insured health plans: Issuers of specific health insurance policies, as well as plan sponsors of applicable self-insured health plans are required to report and pay the PCORI fee.
- Fully-insured health plans with no HRA: The health insurance carrier is responsible for reporting and paying the PCORI fee.
- Fully-insured health plans with HRA: Employers with fully-insured plans that also sponsor a separate medical HRA must pay the PCORI fee for the HRA, while the insurer pays the fee for the fully-insured plan. In this situation, the underlying fully-insured plan and the HRA are treated separately with respect to the PCORI fee.
What types of health plans are subject to the PCORI fee?
Please refer to the IRS chart on what types of insurance coverage are subject to the PCORI fee. Additionally, the PCORI fee only applies to plans that cover individuals residing in the United States.
How do I Make Payments and When is the Deadline?
The PCORI fee must be paid using Form 720, Quarterly Federal Excise Tax Return. Please refer to the instructions on how to complete Form 720. The payment is made through the Electronic Federal Tax Payment System (EFTPS) and is applied to the second quarter: select Q2 for the Quarter under Tax Period on the “Business Tax Payment” page. The deadline for filing Form 720, as well as for payment, is July 31 of the year following the year in which the plan ended.
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