ACA News & Publications

ACA Pathways: Attention Self-insured Plan Sponsors, PCORI Fee For Plan Years Ending On or After October 1, 2019 Announced as July 31 Payment Deadline Nears

June 09, 2020

On June 8, 2020, the Internal Revenue Service (IRS) issued Notice 2020-44 in which it announced the Patient-Centered Outcomes Research Institute (PCORI) Fee for plan years ending on or after October 1, 2019 and before October 1, 2020 is $2.54 per average number of covered lives. This is an increase over the previous year's fee of $2.45 that applies to plan years ending on or after October 1, 2018 and before October 1, 2019.

PCORI Fee

The PCORI Fee first became effective beginning with plan years ending on or after October 1, 2012 (generally for plan years beginning November 1, 2011 and ending October 31, 2012), and was initially intended to be assessed annually for seven years, however, as a result of legislation passed last year, known as the Further Consolidated Appropriations Act of 2020, the PCORI Fee was extended for another 10 years. As a result, the Fee will continue to be imposed through the 2029 plan year.

The PCORI Fee is considered an excise tax that must be reported on IRS Form 720 for the second quarter reporting period. It is due by July 31 of the year following the last day of the plan year being reported on. Payment is to be remitted along with the Form 720 filing and the amount will vary depending on the plan year. Employers who sponsor self-funded plans are responsible for paying this fee, as are insurers of most fully insured policies.

The Fee is not assessed against most healthcare flexible spending accounts (unless they do not meet the requirements for being an excepted benefit under the ACA), as well as employee assistance, disease management, and wellness programs not providing significant medical care benefits, and plans covering primarily employees working outside the United States. 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 example, a plan sponsor with a self-insured plan providing major medical benefits and a separate self-insured plan with the same plan year that provides prescription drug coverage may be considered as a single plan so that the same covered life under each plan is counted only once. Note however, plan sponsors that have established a health reimbursement account (HRA) integrated with their fully-insured medical plan may be subject to a separate PCORI Fee assessment for that HRA.

Determining The Fee Amount

The following table depicts the fee amount payable by the July 31, 2020 filing and payment deadline:

Plan Year Ending Fee Amount
January 31, 2019 $2.45 per average number of covered lives
February 28, 2019 $2.45 per average number of covered lives
March 31, 2019 $2.45 per average number of covered lives
April 30, 2019 $2.45 per average number of covered lives
May 31, 2019 $2.45 per average number of covered lives
June 30, 2019 $2.45 per average number of covered lives
July 31, 2019 $2.45 per average number of covered lives
August 31, 2019 $2.45 per average number of covered lives
September 30, 2019 $2.45 per average number of covered lives
October 31, 2019 $2.54 per average number of covered lives
November 30, 2019 $2.54 per average number of covered lives
December 31, 2019 (calendar year plans) $2.54 per average number of covered lives

Plan sponsors of self-insured plans may use one of three methodologies for determining the average number of covered lives under the plan for the plan year:

  1. The Actual Count Method. Under the Actual Count Method, the average number of covered lives is determined by adding the totals of lives covered each day of the plan year and dividing by 365 or 366, as applicable.
  2. The Snapshot Method. Under the Snapshot Method, the average number of covered lives is based on the total number of covered lives on a particular date (or dates) in the first, second, or third month of each quarter, divided by the number of dates on which the count was made. An equal number of dates must be used for each quarter, and each date used must be within three days of the corresponding date in the other quarters under this method.
  3. The Form 5500 Method. Under the Form 5500 Method, for a plan that offers both self-only coverage and dependent (family) coverage, the average number of covered lives is based on the total number of participants covered at the beginning and the end of the plan year divided by two, per the Form 5500 (or Form 5500-SF) that was filed for the plan no later than July 31st following the end of the plan year being reported on.
  4. Any Reasonable Method. To assist plan sponsors and health care issuers who may not have anticipated the need to continue calculating the number of covered lives beyond the 2019 plan year, Notice 2020-44 also provides relief for calculating the average number of covered lives with respect to the first year of the PCORI Fee extension period (plan years ending on or after October 1, 2019 through September 30, 2020). In addition to the existing methodologies, plan sponsors have the option of using any reasonable method to capture the average number of lives as long as it is provided consistently for the duration of the plan year. For purposes of the July 31, 2020 PCORI Fee payment deadline, this alternative is available with respect to plans with plan years ending on or after October 1, 2020 through December 31, 2020, which includes 2020 calendar year plans.

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.

For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits Consultant or Burnham Benefits at 949-833-2983 or inquiries@burnhambenefits.com


Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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