December 01, 2020
The Internal Revenue Service (IRS) issued Notice 2020-84 in which it announced Patient-Centered Outcomes Research Institute (PCORI) Fee for plan years ending on or after October 1, 2020, and before October 1, 2021, is $2.66 per average number of covered lives. This is an increase over the previous year’s fee of $2.54 that applies to plan years ending on or after October 1, 2019, and before October 1, 2020.
The PCORI Fee first became effective beginning with plan years ending on or after October 1, 2012, and was initially intended to be assessed annually for seven years. However, as a result of legislation passed in 2019, 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.
The following table depicts the fee amount payable by the July 31, 2021 filing and payment deadline:
|Plan Year Ending||Fee Amount|
|January 31, 2020||$2.54 per average number of covered lives|
|February 28, 2020||$2.54 per average number of covered lives|
|March 31, 2020||$2.54 per average number of covered lives|
|April 30, 2020||$2.54 per average number of covered lives|
|May 31, 2020||$2.54 per average number of covered lives|
|June 30, 2020||$2.54 per average number of covered lives|
|July 31, 2020||$2.54 per average number of covered lives|
|August 31, 2020||$2.54 per average number of covered lives|
|September 30, 2020||$2.54 per average number of covered lives|
|October 31, 2020||$2.66 per average number of covered lives|
|November 30, 2020||$2.66 per average number of covered lives|
|December 31, 2020 (calendar year plans)||$2.66 per average number of covered lives|
Plan sponsors of self-insured plans may use one of the following methodologies for determining the average number of covered lives under the plan for the plan year:
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 www.irs.gov/uac/Newsroom/Patient-Centered-Outcomes-Research-Institute-Fee.
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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.