2020 PCORI Fee Update
PCORI (Patient-Centered Outcomes Research Trust Fund) fees are a form of excise tax that applies to health sponsors and insurers who offer self-funded insurance plans. PCORI is designed to support effective clinical research. Despite raging financial and economic strife during the current COVID-19 pandemic, the IRS is increasing the PCORI fee for the July 2000 filing.
Who Has to File PCORI?
- Prescription drug and medical plans
- Self-insured vision or dental plans
- HRAs that are not integrated with another insurance plan
- Certain Healthcare FSAs
- Retiree-only insurance plans
- Above health plans issued by governmental employees
The initial plan, which was due to end on 10/1/19 has now been extended until 10/1/29. PCORI fees must be reported and paid by July 31 each year.
How to Calculate Your PCORI Fee
The fee is calculated based on the average number of people the plan covers. This includes employees, covered retirees, dependents, and COBRA participants. There are three alternative methods that you can use to calculate your PCORI fees, but you may only use a single method to determine the average number of lives covered in any given year. However, you may employ a different method each year. The following methods are provided:
- Actual Count: As a sponsor, you may calculate the average number of individuals covered under your health plan for the allocated year by finding the total number of lives covered each day of the plan year and dividing that amount by the number of days in the allocated plan year.
- Snapshot: As a sponsor, you may calculate the average number of individuals covered under your health plan for the allocated year by adding the number of individuals covered by the health plan on any date in the first, second, or third month in each quarter of the designated year, or an equal number of days in each quarter, and dividing the total figure by the number of dates you included in the count.
- Form 5500: As a sponsor, you may calculate the average number of individuals covered under your health plan for the allocated year by using a formula that includes the number of individuals reported on Form 5500 for the plan year. You can only use this method if your filed Form 5500 before or on the due date.
Does PCORI apply to all medical plans?
There are no exceptions for small businesses. PCORI fees apply to all medical plans. There are also no exceptions for non-profit or church plans, or government plans. Union plans are also obliged to pay the PCORI fee for their covered members.
As an employer, how does PCORI work if I sponsor multiple plans?
If you provide multiple self-funded health plans, you will still only pay one fee per covered individual.
How do I pay the fee?
You will report and pay your PCORI fee using the IRS Form 720 on July 31 each year until 10/1/29. Although Form 720 is typically filed each quarter, you will only need to file your PCORI fee once each year, at the end of the second quarter. If you are a government employer, a not-for-profit organization, or a church, even though you do not have to file federal tax returns, you will still need to file Form 720.
How much is the PICORI fee?
Any PCORI payment that is due covers the year that culminated in the preceding calendar year. For example, the fee that is due on July 31, 2020, is for the plan year that ended in 2019. The amount you will pay per individual will vary depending on the end of the plan year.
- For non-calendar plans with a plan year end date between 1/1/19 and 9/30/19, the fee is $2.45.
- For plan years ending between 10/1/19 and 9/30/20 and subsequent plan years, the fee is $2.54.
Do PCORI fees apply to short-term health plans?
Yes, fees apply to plans that run for fewer than 12 months. The only exemptions are federal law programs for providing medical care and governmental programs.
Is the PCORI fee tax-deductible?
Yes, all PCORI fees are tax-deductible.
Employers who wish to find out more about PCORI fees can do so here.