The Patient-Centered Outcomes Research Institute (PCORI) filing and fee payment deadline of July 31, 2023, for plan years ending in 2022 is quickly approaching. Plan sponsors of self-funded group health plans are responsible to file and pay the PCORI fee annually whereas fully-insured group health plans are assessed this fee in their monthly premium payments by their health insurance carriers.
Read on for more information.
PCORI Fee Background
The PCORI fee is a requirement under the Affordable Care Act to fund the Patient-Centered Outcomes Research Institute, focusing on clinical effectiveness research. It was scheduled to end for plan years ending on or after October 1, 2019. However, a federal spending bill passed by Congress in 2019 reinstated the PCORI fees and filings for another ten years, through 2029.
The PCORI fee is filed and paid annually on IRS Form 720 (Quarterly Federal Excise Tax Return). Employers with self-funded health plans ending in 2022 are advised to use the 2nd quarter Form 720 to file and pay the PCORI fee by July 31, 2023. The information is reported in Part II of Form 720.
Since Form 720 is a tax form, rather than an informational return form such as Form 5500, employers or their accountants, rather than third-party administrators, must prepare and file it.
For self-funded group health plans, the fee is calculated using the average number of lives covered under the plan, including all employees and covered dependents, and the applicable rate for that plan year, outlined in the table below and also accessed on the IRS website here. (NOTE: As of publication, the IRS has not yet updated the rate table on its website.)
PCORI Fee Calculation
The PCORI fee is calculated on the average number of lives covered under an applicable self-funded health plan. The IRS provides the following three alternative methods to determine the average number of lives covered under a plan for the plan year for PCORI fee calculation purposes:
- Actual Count Method
- Snapshot Method
- Form 5500 Method
Reach out to your Risk Strategies representative for more details on the three alternative methods outlined above.
HRAs/FSAs/HSAs/Excepted Benefits
For Health Reimbursement Arrangements (HRAs), the IRS outlined two special PCORI fee-related rules. First, if the integrated medical plan is fully insured, then the plan sponsor may treat each employee's HRA as covering a single life and is not required to include all covered lives, such as covered dependents, when reporting and paying the PCORI fee.
Second, if the integrated group health plan is self-funded (including level-funded plans), then the HRA is not subject to a separate PCORI fee as long as the HRA and the self-funded group health plan have the same plan sponsor and have the same plan year. In this case, one PCORI filing and fee for the self-funded group health plan is due, based on all covered lives, not just employees (as noted in the paragraph directly above).
Note that Individual Coverage HRA (ICHRAs) are also subject to the PCORI fee and must be reported and paid by the July 31, 2023 deadline.
Generally, Health Care Flexible Spending Accounts (FSAs) are not subject to PCORI fees as “excepted benefits.” However, if an employer contributes to an FSA that exceeds the lesser of $500 annually or a dollar-for-dollar match of the employee’s contribution, then the FSA is not considered an “excepted benefit” and is subject to PCORI fees. Similar to the HRA with a fully-insured integrated medical plan, the plan sponsor may assume one covered life for each employee with an FSA.
Health Savings Accounts (HSAs) are not subject to the PCORI since HSAs are not group health plans, but rather individual accounts.
The PCORI fee also does not apply to most dental and vision coverage since they are “excepted benefits,” exempt from PCORI fee requirements.
Click here for an IRS table summarizing which common health plans/arrangements are subject to the PCORI fee.
PCORI Filing and Payment Date Deadlines for 2023
As we previously reported last year, the IRS issued Notice 2022-59 in November 2022, increasing the PCORI fee for plan years ending on or after October 1, 2022 and before October 1, 2023, including plan years ending December 31, 2022, to $3.00 (up from $2.79).
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Plan Year End Date
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PCORI Fee Rate
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Filing and Payment Date
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January 2022
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$2.79/covered life
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July 31, 2023
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February 2022
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$2.79/covered life
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July 31, 2023
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March 2022
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$2.79/covered life
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July 31, 2023
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April 2022
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$2.79/covered life
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July 31, 2023
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May 2022
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$2.79/covered life
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July 31, 2023
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June 2022
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$2.79/covered life
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July 31, 2023
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July 2022
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$2.79/covered life
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July 31, 2023
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August 2022
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$2.79/covered life
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July 31, 2023
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September 2022
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$2.79/covered life
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July 31, 2023
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October 2022
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$3.00/covered life
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July 31, 2023
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November 2022
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$3.00/covered life
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July 31, 2023
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December 2022
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$3.00/covered life
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July 31, 2023
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Click here for the IRS PCORI Fee Q&A webpage for additional information.
Short Plan Years
The PCORI still fee applies to a short plan year of an applicable self-funded health plan. A short plan year is a plan year of fewer than 12 months. The PCORI fee for the short plan year of an applicable self-funded health plan is calculated by multiplying the average number of lives covered during that plan year by the applicable dollar amount for that plan year.
Example: Self-funded short plan year starts on April 1, 2022 and ends on December 31, 2022. PCORI fee is equal to the average number of lives covered for April through December 2022, multiplied by $3.00 (the applicable dollar amount for plan years ending on December 31, 2022).
Next Steps for Employers
- Self-funded plans: For employers sponsoring a self-funded group health plan (including level-funded plans and HRAs), contact your Risk Strategies representative for support with PCORI fee calculations and with any additional questions.
- Fully insured plans: As noted above, no action is required for employers sponsoring a fully insured group health plan since the PCORI fee is already baked into their monthly premium payments by their health insurance carriers.
- Finally, don’t forget another important health & welfare plan compliance filing deadline due on July 31, 2023 as well — Form 5500. Click here for more information on the upcoming Form 5500 filing deadline.
Risk Strategies is here to help. Contact us directly at benefits@risk-strategies.com.
