***When the President signed the 2020 spending legislation (the 2020 Further Consolidate Appropriations Act), that repealed the ACA’s Cadillac Tax, the 2.3% excise tax on medial devices, the HIT (Health Insurance Tax). But, it also extended PCORI/CERF for another decade—now expected to sunset 2029. However, as of June 1, 2020, the IRS has yet to set the rate for 1/1 plans ending 12/31/2019. It is expected to be at or above the $2.45 per person charge. ***June 8, 2020 update, IRS Released new rate at $2.54 per person (update here).*** See blog update here about the extension until 2029.
*Note-this is the final year for 2018 calendar year plans. Plans that end between Jan 1, 2019 and October 1, 2019 will owe again, next year. Please see our multi-year reference chart here.
Applies to: Self-Insured Health Plans, including HRAs & FSAs
Employers who sponsor self-insured health plans must pay their annual Patient-Centered Outcomes Research Institute (PCORI) fees by July 31.
PCORI fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). The applicable PCORI fee you pay each July is based on when your plan year ended.
- $2.26 for plan years ending between January 1, 2017 – September 30, 2017
- $2.39 for plan years ending between October 1, 2017 – September 30, 2018
- $2.45 for plan years ending on/after October 1, 2018, but before October 1, 2019
- Please see our multi-year reference chart here
As a reminder, the PCORI fees are based on the average number of covered lives under the plan or policy. This ordinarily includes employees and their enrolled spouses and dependents. Individuals who are receiving continuation coverage (such as COBRA coverage) must also be included in the number of covered lives under the plan in calculating the fee. Plan sponsors of self-insured health plans must use one of the following three methods to determine the average number of lives covered under a plan for the plan year:
- Actual Count Method – A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the plan year and dividing that total by the total number of days in the plan year.
- Snapshot Method – A plan sponsor may determine the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates, if an equal number of dates is used in each quarter) during the first, second or third month of each quarter, and dividing that total by the number of dates on which a count was made.
- Form 5500 Method – An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year 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.
HRAs and Health FSAs
Health Reimbursement Arrangements (HRAs) and health Flexible Spending Accounts (FSAs) are not completely excluded from the obligation to pay PCORI fees. However, two special rules apply for plan sponsors that provide an HRA or health FSA. Under these special rules:
- If a plan sponsor maintains only an HRA or health FSA (and no other applicable self-insured health plan), the plan sponsor may treat each participant’s account as covering a single life. This means that the plan sponsor is not required to count spouses or other dependents.
- An HRA is not subject to a separate research fee if it is integrated with another self-insured plan providing major medical coverage, provided the HRA and the plan are established and maintained by the same plan sponsor and have the same plan year. This rule allows the sponsor to pay the PCORI fee only once with respect to each life covered under the HRA and other plan. However, if an HRA is integrated with an insured group health plan, the plan sponsor of the HRA and the issuer of the insured plan will both be subject to the research fees, even though the HRA and insured group health plan are maintained by the same plan sponsor.
The same analysis applies to health FSAs that do not qualify as excepted benefits.
Please contact your AssuredPartners’ Sales Executive or Account Manager for any further questions or assistance.
Please see the following IRS resources for more information on the ACA’s PCORI Fees:
IRS Notice 2018-85 (released 11/5/2018)
Final Regulations on the PCORI Fees
PCORI Fee Overview Page
PCORI Fee: Questions and Answers
IRS Form 720 and Instructions
PCORI Fee Due Dates and Applicable Rates
Chart of Health Coverage and Arrangements Subject to PCORI Fee
AP Benefit Advisors’ Multi-Year PCORI Fee Reference Chart
For more information, contact email@example.com. The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.
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