Patient-Centered Outcomes Reach Institute (also known as PCORI) fees are due by July 31, 2021, following the end of the ERISA (also known as the Employee Retirement Income Security Act) plan year. This fee is charged to employers and health insurers offering self-insured plans. If the renewal date and ERISA plan year differ, you would use the ERISA plan year.
PCORI fees began in 2012 and are expected to end in October 2029. The purpose of PCORI is to progress the quality and relevance of evidence-based medicine.
To determine your fees, you would need to multiply the average number of insured participants, including dependents, during the plan year:
- If the plan ended on or after October 1, 2020, but before October 1, 2021, the rate per person is $2.66.
- If the plan ended on or after October 1, 2019, but before October 1, 2020, the rate per person is $2.54.
The IRS requires the following types of plans to submit the PCORI documents and the associated fees:
- Companies that have HRAs (health reimbursement accounts)
- Companies that have level-funded plans (Aetna, Humana, or UnitedHealthcare)
Businesses with employee assistance programs, wellness programs, or disease management programs are exempt from PCORI fees if they do not provide substantial medical treatment or care. Other exemptions include stand-alone dental or vision plans, health savings account (HSA) plans, Archer Medical Savings Accounts (MSA), Medicare, and Medicaid, along with supplemental plans, Children’s Health Insurance program (CHIP), workers compensation income, disability income, plans offered through the branches of the United States Armed Forces, or certain Native American tribal plans.
There are three methods for calculating the number of participants covered on a self-insured plan:
- Form 5500: The Annual Return/of Employee Benefit Plan or Form 5500-SF (short form annual return/report of employee benefit plan for small employers) is permitted by plan sponsor. This only applies to groups that employ 100 employees or more.
- Snapshot: Employers that have employees coming on and off the plan monthly might prefer this method. This is when the plan sponsor would take a snapshot of the employees covered on any given day in a fiscal quarter. When using this method, it’s important to be consistent. The person calculating would need to use the same calculation for each quarter to determine the correct number. For example, they could use the third Wednesday of the second quarter of each reporting period or use the last Friday of the third quarter to obtain the number.
- Actual count: In this method, plan sponsors calculate the total number of persons covered in the plan for each day of the year and divide it by the number of days in the plan year. This calculation would give them the average number of employees.
In order to report PCORI fees you need to fill out Form 720 (Quarterly Federal Excise Tax Return) for the second quarter of each year. The fee section is reported in Part II of the form. If any corrections need to be reported after sending in the 720 form, you would need to send in a Form 720-X.
Your ARC representative is here to help. Contact us today if you have any questions about the process.