PCORI Fee Due July 31, 2020
April 7, 2021
Under the Patient Protection and Affordable Care Act (PPACA), fees are assessed for some self-insured health plans. The Comparative Effectiveness Research Fee (CERF) is designed to help fund the Patient-Centered Outcomes Research Institute (PCORI), an independent, nonprofit organization authorized by Congress in 2010 designed to fund medical research that will provide patients, their caregivers, and clinicians with the evidence-based information needed to make better-informed healthcare decisions.
Group health plans subject to PCORI fees include self-insured plans, Health Reimbursement Arrangements (HRA’s), and some Flexible Spending Accounts (FSA’s) which are not excepted benefits. For HRAs, this also includes Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), as well as Individual Coverage Health Reimbursement Arrangements (ICHRAs) that reimburse more than only premiums for individually owned health coverage.
Please note that PCORI Fee has been extended: The PCORI fee was originally set to expire and not be assessed for plan years ending after September 30, 2019. On December 20, 2019, Congress passed the Further Consolidated Appropriations Act. This legislation extended the PCORI fee for another ten years, and now the fee applies to all plan years that end on or before September 30, 2029. The IRS finally released Notice 2020-44 on June 8, 2020, to update the applicable rate due for plan years ending after September 30, 2019, but before October 1, 2020. The Notice did not provide relief on the filing deadline. This means that for plan years ending after September 30, 2019 and on or before December 31, 2019, those plans must still file their PCORI fees by July 31, 2020.
Policy or Plan Ending Date in the months of: Jan. 2019 – Sept. 2019
File return no later than: 7/31/2020
Applicable rate: $2.45
Policy or Plan Ending Date in the months of: Oct. 2019 – Dec. 2019
File return no later than: 7/31/2020
Applicable rate: $2.54
Policy or Plan Ending Date in the months of: Jan. 2020 – Sept. 2020
File return no later than: 7/31/2021
Applicable rate: $2.54
The fee is paid using Tax Form 720 and is due annually on July 31 of the calendar year immediately following the last day of the plan year. For example, for a plan year ending on or before December 31, 2019, the form must be filed (and the fee paid) by July 31, 2020.
Who Pays the Fees:
Health insurance policies and self-insured plans that provide only excepted benefits, such as plans that offer benefits limited to vision or dental benefits and most flexible spending arrangements (FSAs), are not subject to the PCORI fee. Health insurance policies or self-insured plans that are limited to employee assistance programs, disease management programs or wellness programs are not subject to the PCORI fee if these programs do not provide significant benefits in the nature of medical care or treatment. For more information click here.
The PCORI fees for fully insured major medical coverage will be paid by the insurance carrier. The PCORI fees for self-funded major medical coverage will be paid by the employer.
HRA or FSA with a Fully Insured Medical Plan
If the Employer has other medical healthcare plans and that coverage is fully insured, covered lives that were already counted with the medical healthcare plan will need to be counted and paid again for the HRA or non-exempt FSA plan.
The insured carrier will pay the fees for the medical healthcare plan and the Employer will pay the fees for the HRA or non-exempt FSA plan. When calculating the HRA or FSA PCORI fee (if applicable) the employer can treat each participant in the HRA or FSA as covering a single life for purposes of the PCORI fee. No fee is required for the participant’s spouse or dependent children.
HRA or FSA with a Self-Funded Medical Plan
If the Employer has other medical healthcare plans that are self-funded and on the same plan year as the HRA or nonexempt FSA, then any covered life that was already counted for the medical healthcare plan will not need to be counted and paid again for the HRA or non-exempt FSA plan. If the Employer has other medical healthcare plans that are self-funded and NOT on the same plan year as the HRA or FSA, then any covered life that was already counted for the medical healthcare plan will need to be counted and paid again for the HRA or non-exempt FSA plan.
If the Employer has no other medical healthcare plan with the HRA, then the fee will be paid by the Employer on the number of covered lives under the HRA. The Employer can treat each participant in the HRA as covering a single life for purposes of the PCORI fee. No fee is required for the participant’s spouse or dependent children. This includes QSEHRAs and ICHRAs that reimburse more than premiums.
Flexible Spending Accounts (FSAs) that meet the definition of an excepted benefit are exempt from PCORI fees; however, if the FSA does not meet the definition of an excepted benefit, the fee is payable by the Employer. The Employer can treat each participant in the FSA as covering a single life for purposes of the PCORI fee. No fee is required for the participant’s spouse or dependent children.
Your FSA plan may be subject to PCORI fees if you have an Employer contribution exceeding $500 or you do not offer other group health coverage in conjunction with the FSA. Please contact Benefit Strategies, LLC if you would like information specific to your account.
Remitting the PCORI Fee:
You will not be invoiced for the PCORI Fee. You are required to file federal excise tax return Form 720; please Click Here for instructions for Form 720 on how to fill out the form and calculate the fee. Payment must be submitted with the form by July 31 of the calendar year immediately following the last day of the plan year.
Third-party administrators are prohibited under the health reform law from remitting the fee on your behalf.
How to Calculate:
The IRS allows several different methods for determining the average number of covered lives. We recommend the Snapshot Count Method and have two ways to assist you with determining the number.
ABRs are available the first of each month, simply select the ones you need to perform the Snapshot Count Method calculation. At the bottom of each report you will find the total number of participants. Follow these steps for performing the calculation using the Snapshot Count Method: Count the total number of covered lives on a specific date each quarter. Add the numbers for each quarter together and then divide that number by 4. Note that the date selected must be the same for each quarter (i.e., 1/1, 4/1, 7/1 & 10/1) or within 3 days of the first date used each following quarter.