Self-funded plan sponsors and health insurance issuers have until July 31, 2021 to remit Patient-Centered Outcomes Research Institute (PCORI) fees for the plan year that ended in 2020.
The Affordable Care Act (ACA) created the PCORI fees, and they were originally applicable for plan years ending between October 1, 2012 and September 30, 2019. However, the spending bill that repealed the Cadillac tax late in 2019 also extended the PCORI fees for an additional 10 years. See our related blog here.
The PCORI fee is reported and paid annually on IRS Form 720. These fees are due July 31 of each year for the plan year that ended in the prior calendar year. Therefore, the deadline for filing Form 720 is July 31, 2021 for plan years that ended in 2020.
The fee is based on the average number of covered lives multiplied by the applicable fee.
- For plan years that ended up to, and including, 9/30/20, the fee is $2.54 multiplied by the average number of covered lives.
- For plan years that ended between 10/1/20 and 12/31/20, the fee is $2.66 multiplied by the average number of covered lives.
Self-funded plan sponsors and health insurance issuers are to calculate the average number of covered lives using one of the following permissible methods:
- Actual count method
- Snapshot method
- Form 5500 method (applicable only to self-funded plan sponsors)
- Member months method (applicable only to health insurance issuers)
- State form method (applicable only to health insurance issuers)
Due to the anticipated termination of the fee for plan years ending after September 30, 2019, self-funded plan sponsors and health insurance issuers may not have anticipated the need to identify the number of covered lives beyond this date. Therefore, IRS Notice 2020-44 provides temporary transition relief relative to the calculation of covered lives.
Self-funded plan sponsors and health insurance issuers may use any reasonable method for calculating the average number of covered lives for plan years ending on or after October 1, 2019, and before October 1, 2020. If a reasonable method is used (as opposed to one of the above permissible methods) then that reasonable method must be applied consistently for the duration of the plan year.
If you have questions about how to calculate the average number of lives, which plans need to be reported, or any other questions regarding PCORI fees, please contact your Hylant representative.
The above information does not constitute advice. Always contact your employee benefits broker or trusted adviser for insurance-related questions.