The Patient-Centered Outcomes Research Institute (“PCORI”) fee initially applied from 2012 to 2019; however, in December 2019, the Further Consolidated Appropriations Act extended the fee to 2029. Consequently, employers who sponsor self-insured medical plans, including health reimbursement arrangements (“HRAs”) which are integrated with medical insurance, must continue to pay the fee through year 2029.
Employer Action Items
There are three possible methods applicable for plan years ending in 2023:
- Actual count method: Covered lives are calculated on each day of the plan year, and the result is averaged over the total number of days in the plan year.
- Snapshot count method: The number of lives covered on a date equals the actual number of lives on a specified date. To compute, add the total number of lives covered on a certain date during the first three quarters of the benefit year and divide that total by the number of dates on which a count was made. For this purpose, the same months must be utilized for each quarter and the date utilized for the second and third quarters must fall within the same week of the quarter as the corresponding date utilized for the first quarter.
- Form 5500 method: For health plans that are required to file IRS Form 5500 (those with 100 or more participants), alternative methods of counting are available depending on whether dependent coverage is offered. Form 5500 must be filed by July 31 to use this option. The additional details on using this method are beyond the scope of this summary.
Note: The snapshot count method is generally recommended. However, consult with your tax advisor for more information and to determine which method is best for your organization.
Summary
The fee, in the form of a federal excise tax, applies to all such plans and there are no exceptions for smaller employers. However, most health flexible spending accounts (“FSAs”) offered in conjunction with medical insurance are exempt from the PCORI fee. A plan sponsor is also able to treat multiple self-insured plans with the same plan year as a single plan for reporting and payment purposes.
For More Information
For further information, including links to the final PCORI regulations, questions and answers regarding the PCORI Fee, a chart depicting the types of insurance coverage subject to the fee, and the Form 720, along with instructions, please visit the IRS website at https://www.irs.gov/pub/irs-pdf/i720.pdf.
For more information
We’re ready when you are. Get in touch and a friendly, knowledgeable Baldwin advisor is prepared to discuss your business or individual needs, ask a few questions to get the full picture, and make a plan to follow up.
This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. The Baldwin Insurance Group Holdings, LLC (“The Baldwin Group”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. The Baldwin Group does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, The Baldwin Group does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.
The Baldwin Group offers insurance services through one or more of its insurance licensed entities. Each of the entities may be known by one or more of the logos displayed; all insurance commerce is only conducted through The Baldwin Group insurance licensed entities. This material is not an offer to sell insurance.
