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For self-insured plans, the reports and payments are due no later than July 31 of the year following the last day of the policy or plan year. For example, the report/payment for a plan year ending on December 31, 2014, must be filed by July 31, 2015. The Patient-Centered Outcomes Research Institute (PCORI) fee supports the Patient-Centered Outcomes Research Trust Fund, which will conduct comparative effectiveness research. The fees will be imposed for each policy year ending on or after October 1, 2012 and before October 1, 2019.
Self-insured plans established and maintained by an employer or employee organization to provide accident and health coverage are subject to the fee. For purposes of the regulation, a plan is considered self-insured if any portion of the coverage is provided other than through an insurance policy. This includes retiree-only plans, but does allow certain exemptions, such as excepted benefits.
If the employer sponsors multiple self-insured plans, for example, medical coverage, prescription drug coverage, an HRA and/or health FSA , the plans can be treated as a single self-insured health plan if they have the same plan year for purposes of calculating the fee.
The plan sponsor is subject to the fee, which is deductible under section 162 of the Internal Revenue Code. Responsibility for the fee under multiemployer or multiple employer plans depend on the arrangement.
Controlled group rules are not applicable, which means each employer that maintains a plan will be responsible for filing and paying its portion of the fee.
The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year. Click here to view the fee amounts.
The fee is to be based on the average number of lives in the plan, which can be calculated in one of several ways:
Form 5500 Method: Determines the average number of lives covered under the plan for the plan year based on a formula that includes the number of participants actually reported on the Form 5500 for the plan year. This method can only be used if the Form 5500 is filed no later than the due date for the fee imposed for that plan year.
Example: Employer A is the plan sponsor of the Employer A Self-Insured Health Plan, which has a fiscal year plan year ending on July 31, 2020, and offers only self-only coverage. In addition, the Employer A Self-Insured Health Plan 2019 Form 5500 reports 4,000 plan participants on the first day of the plan year and 4,200 plan participants on the last day of the 2019 plan year. Employer A must treat the number of lives covered for the plan year ending July 31, 2013, as equal to the sum of 4,000 and 4,200 or 8,200, divided by 2, or 4,100 average lives.
Actual Count Method: Determines average number of lives covered under the plan for the plan year using actual counts of employees.
Example: Employer B is the plan sponsor of the Employer B Self-Insured Health Plan, which has a calendar year plan year. Employer B calculates the sum of lives covered under the plan for each day of the plan year ending December 31, 2020 as 3,285,000. The average number of lives covered under the plan for the plan year ending December 31, 2020, is 3,285,000 divided by 365, or 9,000 average lives.
Snapshot Method: Determines the average number of lives covered under the plan for the plan year by looking at the totals of lives covered on selected dates during each quarter.
Example: Employer C is the plan sponsor of the Employer C Self-Insured Health Plan, which has a calendar year plan year. On January 4, 2020, the Employer C Self-Insured Health Plan covers 2,000 lives, on April 5, 2020, 2,100 lives, on July 5, 2020, 2,050 lives, and on October 4, 2020, 2,050 lives. Under the snapshot method, Employer C must determine the average number of lives covered under the Employer C Self-Insured Health Plan for the plan year ending December 31, 2013, as 8,200 (2,000 + 2,100 + 2,050 + 2,050) divided by 4, or 2,050 average lives.
HRAs and Health FSAs that are not excepted benefits have special counting rules based on other plans provided (or not provided) by the employer.
Stand-Alone: If the HRA/Health FSA is not integrated with another self-funded plan, count one covered life for each employee with an HRA/Health FSA. Note that this differs from the counting method used for health plans, which must count each covered life (employees and dependents).
Integrated With Fully Insured Coverage: The employer must pay the PCORI fee for the self-insured HRA/Health FSA, calculated by counting one covered life for each employee with an HRA/Health FSA.
Integrated With Self-Insured Coverage: Count each individual covered by both plans only once. Add to this any individuals covered by only one plan using the counting method used for other individuals in that plan.
The fees must be reported once a year on IRS Form 720 (Rev. June 2022) (Instructions). This form must be filed and fees paid on July 31 of the calendar year immediately following the last day of the plan year. Excise tax ranging from 5% of the fee up to 25% of the fee, in addition to the fee itself.
The IRS may request records substantiating the fee for up to four years from your last payment. The U.S. Department of Health and Human Services (HHS) requires employers to maintain employee count records for 10 years relating to fees.
Material contained in ComplianceDashboard is a compilation of generally published information by the Department of Labor and other public agencies regulating employee benefit plans and employee benefit issues. It is not legal advice, and should not be construed as legal advice. If legal advice or other professional assistance is or may be required with regard to any issues referenced in this website, the services of a competent legal or tax professional should be immediately sought. The inclusion of links within the ComplianceDashboard website is for informational purposes only. ComplianceDashboard does not warrant the accuracy of information outside this website that is found as a result of following links contained herein, nor does the inclusion of those links herein constitute endorsement of the content of any other website. If you have questions regarding this disclaimer, please contact us at 877-328-7880.