Smart Benefits: Reminder - PCORI Fee Due July 31 for Self-Funded Plans

Smart Benefits: Reminder - PCORI Fee Due July 31 for Self-Funded Plans

While the Patient-Centered Outcomes Research Institute (PCORI) fee was originally scheduled to expire at the end of 2019, federal legislation passed in December extended it for another 10 years, until 2029. And the fee for plan years ending in calendar year 2019 is due July 31.

What is the PCORI fee?

The Affordable Care Act (ACA) requires employers who sponsor self-funded health plans (including certain Health Reimbursement Accounts (HRas)) to pay the PCORI fee to the IRS. The ACA created the fee to pay for research on the clinical effectiveness of medical procedures.

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Which plans are subject to the fee?

The PCORI fee applies to all medical plans and some HRAs. Health insurance carriers pay the fee directly to IRS in the case of fully-insured medical plans. For self-funded medical plans, however, the plan sponsor is responsible for filing and paying the fee.

An HRA that is bundled with a fully-insured medical plan is subject to the fee. Although the insurer pays the PCORI fee for the underlying insured medical plan, the plan sponsor must pay a separate PCORI fee for the self-insured HRA. However, an HRA that is bundled with, and has the same plan year as, a self-funded medical plan is not subject to a separate fee. 

When is the fee due?

PCORI fees are due on an annual basis by July 31st of the calendar year following the last day of the plan year. 

How is the fee paid?

Employers who are subject to the PCORI fee must report the fees on Form 720 and send the form, with payment, to the IRS. 

How much is the fee?

The amount of the PCORI fee is equal to the average number of lives covered during the plan year multiplied by the applicable dollar amount as shown below.

When calculating the fee for a self-funded medical plan, employees and dependents are counted as covered lives. When calculating the fee for an HRA, only employees are counted as covered lives. 

Is the PCORI fee tax-deductible?

In June 2013, the IRS issued a legal opinion that the PCORI fee is a tax-deductible expense (under Code section 162(a)) for self-insured plan sponsors and for health insurers.

 

Sam Slade is Managing Director, Employee Benefits, at The Hilb Group of New England, where he delivers consulting and brokerage services to local employers. He has extensive experience in all aspects of employee benefits, including underwriting, plan design, communications, compliance, and analytics, with a particular focus on alternative funding and self-insurance. Sam lives in South Kingstown with his wife and three sons.