Understanding PCORI Fees: What They Are and Who is Required to Pay Them
The Patient-Centered Outcomes Research Institute (PCORI) fee is a federal fee established under the Affordable Care Act (ACA) to fund research that helps patients, healthcare providers, and policymakers make informed healthcare decisions. If you are an employer or plan sponsor offering health coverage, it’s important to understand if you are responsible for paying the PCORI fee, how to calculate it, and when it is due.
Who is Required to Pay the PCORI Fee?
The obligation to pay the PCORI fee depends on the type of health plan offered:
• Self-Insured Health Plans: Employers that provide self-funded health coverage, including major medical plans, retiree-only plans, and standalone Health Reimbursement Arrangements (HRAs), are responsible for paying the PCORI fee based on the number of covered lives.
• Fully Insured Health Plans: Employers offering fully insured health coverage do not pay the PCORI fee directly. Instead, the insurance carrier is responsible for calculating and paying the fee on their behalf.
•Health Reimbursement Arrangements (HRAs) and Flexible Spending Arrangements (FSAs): If the HRA is not integrated with a fully insured medical plan, the employer must pay the PCORI fee. Most stand-alone FSAs, however, are generally exempt.
If you are unsure whether your plan requires you to pay the fee, it’s recommended to consult with a tax professional or benefits advisor.
When is the PCORI Fee due?
The PCORI fee is due annually on July 31st of the year following the end of your plan year. For example:
• If your plan year ended on December 31, 2024, your PCORI fee payment will be due by July 31, 2025.
Employers or plan sponsors must file IRS Form 720 (Quarterly Federal Excise Tax Return) to report and submit the fee. Although Form 720 is generally filed quarterly for other excise taxes, the PCORI fee is reported and paid once per year.
How is the PCORI Fee Calculated
The PCORI fee is calculated based on the number of covered lives under your plan, including employees, spouses, dependents, and other individuals receiving coverage. The IRS adjusts the fee amount annually to account for inflation. Employers must use the IRS's prescribed methods to calculate the average number of covered lives and apply the current fee rate per covered life.
Key Takeaways
• The PCORI fee helps fund research to improve healthcare decision-making.
• Employers with self-insured health plans or standalone HRAs are generally responsible for calculating and paying the fee.
• For fully insured plans, the insurance carrier handles the payment.
• The fee must be reported and paid using IRS Form 720 by July 31st each year.
• The fee amount is adjusted annually by the IRS.
Need assistance with your PCORI Fee?
Understanding and complying with the PCORI fee requirements is essential to avoid penalties and ensure smooth plan administration. If you have questions about whether your health plan is subject to the fee, how to calculate it, or how to file Form 720, we recommend speaking with Rose Street Advisors, our team is happy to assist you. If you’re not yet a client but need guidance, please don’t hesitate to contact us — we’re here to help ensure your plan remains compliant and well-managed.