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The Patient-Centered Outcomes Research Institute (PCORI) fee helps fund research that evaluates and compares health outcomes, clinical effectiveness, risks and benefits of medical treatments and services. The fee, which is effective 2012-2019, is treated like an excise tax by the IRS. For 2018, the fee is $2.39 for each life subject to the fee.

For fully insured health plans, the insurance carrier files Form 720 and pays the PCORI fee. Employers with fully insured health plans have no filing requirement (but are charged by the carrier for the fee). Employers that sponsor self-insured health plans must file Form 720 and pay the PCORI fee. For self-insured plans with multiple employers, the named plan sponsor is generally required to file Form 720.

Employers and plan sponsors should work closely with their Certified Public Accountant (CPA) for assistance and questions with this form and payments made to the Internal Revenue Service (IRS). Employers and plan sponsors can reference their membership reports and or Form 5500 filings to complete this information using an acceptable count method (see §46.4375-1 or pages 8 and 9 of the Form 720 Instructions).

The Form 720 and fees are due on July 31 of the calendar year following the last day of the plan year. If your medical plan ended in 2017, your Form 720 is due by July 31, 2018. The Form 720 and instructions are available on the IRS website:

Remember that the PCORI fee is assessed on all covered lives – including employees, retirees, spouses and dependents.

Most employers/plan sponsors will need to complete:

  • Company information and quarter ending (e.g., “June 2018”)
  • Part II, IRS No. 133
    • Column (a) – under “Applicable self-insured health plans”, enter “Avg. number of lives covered” in row (c) or (d), depending on end of plan year
    • Column (c) – enter total Fee (lives x $)
    • Tax column – enter the amount of the fee (from Column (c))
  • Part II, Line 2 – enter Total Tax (from Tax column on No. 133)
  • Part III, Line 3 – enter Total Tax (from Part II, Line 2)
  • Part III, Line 10 – enter Balance Due (from Part III, Line 3)
  • Signature section
  • Pay electronically or complete the payment voucher (last page) with “2nd Quarter” checked to pay by check
  • Send the form, along with check and payment voucher, to:
    • Department of the Treasury
      Internal Revenue Service
      Cincinnati, OH 45999-0009

To calculate the “Avg. number of lives covered”, use one of the three methods listed on pages 8 and 9 of the instructions.

  • Actual count method – The total number of lives covered (employees and their covered family members or only employees if HRA or FSA) on each day of the plan year, divided by the total number of days in the plan year.
  • Snapshot method – At least one date during each month of each quarter. Dates in each quarter must be within 3 days of the dates for corresponding quarters.
    • Snapshot actual method – Total number of lives covered (employees and their covered family members or only employees if HRA or FSA) on each selected date, divided by the number of dates used.
    • Snapshot factor method – Number of participants with self-only coverage plus 2.35 times the number of participants with other than self-only coverage. (Do not use this method for HRA or FSA plans.)
  • Form 5500 method – Use participant counts from the 5500 for that plan for that year.
    • Plan with only self-only coverage – Add the total number of participants at the beginning and end of the plan year, and divide by 2 to get the average for the year.
    • Plan with self-only and dependent coverage – Add the total number of participants at the beginning and end of the plan year. (Do not use this method for HRA or FSA plans.)

For the official and full text of the IRS proposed regulations, go to http://federalregister.gov/a/2012-09173.

To read more about PCORI visit www.pcori.org.

Important Disclosure: Information and resources provided pertaining to the Affordable Care Act, the Internal Revenue Code, ERISA and all other federal and state law should not to be construed as legal or tax advice. If you require guidance on such information you should seek professional counsel of a certified public accountant or attorney.