PCORI fees were originally slated to end this year, but the Further Consolidated Appropriations Act of 2020 signed by the Trump Administration extended the fees through September 30, 2029. Insurers and Employers with self-funded plans will continue to be responsible for PCORI fees until 2029 or 2030 depending upon the end date of their plan year.
Self-funded plan sponsors: Don’t miss the July 31, 2021 deadline to file and remit payment for the Patient-Centered Outcomes Research (PCORI) fee.
What is PCORI?
The Patient-Centered Outcomes Research Institute (PCORI) is a non-profit institute that was created under the Affordable Care Act (ACA) to research the effectiveness of medical treatments. PCORI impacts self-funded plan sponsors and is funded by health insurance carriers and health plan sponsors who file a return and remit a fee based on the number of plan participants using one of four approved calculation methods.
When is the PCORI fee due?
All self-insured employer health plans must pay the annual PCORI and reporting fee by July 31, 2021. The PCORI fee is filed using IRS Form 720 (Quarterly Federal Excise Tax Return). Despite being a quarterly return, PCORI fees only need to be filed once per year in the 2nd quarter. Health insurers file and remit the PCORI fee for fully insured plans. The amount of the fee paid per covered member will vary depending on when the 2020 plan year ends.
As a reminder, the PCORI fee does not apply to Health Savings Accounts (HSAs) because they do not constitute a group health plan. On the other hand, Health Reimbursement Accounts (HRAs) and Flexible Spending Accounts (FSAs) may be subject to PCORI fees. Generally, the PCORI fee applies for each individual life covered by a health insurance policy or self-funded plan. For example, if an HRA is integrated with a fully-insured plan, the employer will pay a PCORI fee for the HRA while the insurer will pay a separate PCORI fee for the medical plan. However, only one PCORI fee will apply when multiple plans are offered by the same plan sponsor in the same plan year, meaning an employer will only incur only one PCORI fee for HRAs integrated with a self-funded plan. There is no PCORI fee for stand-alone HRAs that are limited to only dental and vision expenses. As for FSAs, the PCORI fee will apply only if the employer contribution is greater than the employees’ contribution or $500.
How to determine your PCORI fee for the 2021 plan year
Due to the anticipated termination of the PCORI fee, as discussed above, some transition relief has been offered. Issuers of specified health insurance policies ending on or after October 1, 2020 and prior to October 1, 2021 may use the same IRS recommended PCORI calculation methods (actual count, snapshot, member months, and state form) to determine the applicable fees. Likewise, the actual count, snapshot, and Form 5500 methods can still be used to determine the average number of covered lives. Once selected, the chosen method must be applied consistently for the duration of the plan year.
1. Actual Count Method – A plan sponsor may determine the average number of lives covered by adding the totals of lives covered for each day of the plan year and dividing that total by the total number of plan year days.
2. Snapshot Method – Using the same day or day(s) each month of every quarter to determine the average covered lives. Dates in each quarter must be within three days of the corresponding quarters.
- Snapshot Actual Method – Total number of lives covered (employees and their covered family members) on each selected date for each quarter of plan year, divided by the number of dates used. Note, for stand-alone HRA plans or HRAs and FSAs integrated into a fully-insured plan, it is acceptable to count one life per employee and disregard any covered dependents.
- Snapshot Factor Method – Number of participants with self-only coverage plus 2.54 or 2.66 times the number of participants with other than self-only coverage on each selected date for each quarter of plan year, divided by the number of dates used (use one-life-per-employee method for stand-alone HRA plans or HRAs and FSAs integrated into a fully-insured plan).
3. Form 5500 – This method requires an employer to use the number of covered lives for the most current plan year calculated based upon the “Annual Return/Report of Employee Benefit Plan” filed with the Department of Labor (Form 5500) for the last applicable time period. For purposes of this calculation method, an employer will use the sum of the total number of lives covered for the plan year for both self-only coverage and all other coverage starting at the beginning and the end of the plan year, as reported on the Form 5500. For employers who offer coverage only to individuals, an employer can use the average of covered lives counts as reported on Form 5500 at the beginning and end of plan year.
Reminder to Health e(fx) clients: Your Health e(fx) system provides tools for calculating the number of covered lives and the PCORI fee using all methods described above to remit before July 31. If your self-funded plan or HRA/FSA is subject to PCORI fees and you need assistance running the report, or for guidance ascertaining whether the PCORI fees applies to your plans, please contact your Health e(fx) Account Manager.