"PCORI" HRA Research Fees - Now Included on IRS Form 720

Written by: Christina Merhar
Originally published on June 11, 2013. Last updated September 9, 2020.

Last week, the IRS issued a revised Form 720 (Quarterly Federal Excise Tax) that now includes a section for reporting the Patient-Centered Outcomes Research Institute (PCORI) research fees, also called the Comparative Effectiveness Research (CER) fees. The PCORI fee is listed in Part II of the form, IRS No. 133.Revised Form 720 for HRAs

The revised Form 720 reassures many businesses and insurance professionals, who were unsure how to report the fees up until now. The first due date of these fees (for some employers) is July 31, 2013. 

Additionally, the newly revised instructions provide clarification that for a self-insured health plan (such as a Health Reimbursement Arrangement), employers may use one of three (3) methods to generate the number on the form: Actual Count Method, Snapshot Method, and the Form 5500 Method.

About the PCORI Research Fees

The Affordable Care Act (ACA) includes a "research fee" that plan sponsors, including HRA plan sponsors, must pay on an annual basis. The research fee is referred to as the Patient-Centered Outcomes Research Institute (PCORI), or Comparative Effectiveness Research (CER) fee. According to the ACA, the fee will be used to fund governmental research -- ACA created the "Patient-Centered Outcomes Research Institute" to evaluate the relative effectiveness of various medical treatments and procedures.

The ACA imposes this fee on insured plans and self-insured health plans. The IRS has determined an HRA falls under the "self-insured health plans" definition, since HRAs are technically Section 105 ERISA health plans funded by employers. The types of HRA plans that must pay these fees are HRAs not integrated with an applicable self-funded medical plan. The research fee is temporary; it applies to plan years ending on or after October 1, 2012 and before October 1, 2019.

Applicable employers are required to report and pay the PCORI research fees annually via Form 720, due by July 31 of each year. 

If the employer currently files Form 720, the fee will be paid with the second quarter return. If the employer does not file Form 720, the employer only needs to file the return for the second quarter (not quarterly).

How Much is the PCORI Research Fee?

The PCORI fee will be adjusted for each plan year's ending, as follows:

  • October 1, 2012 – September 30, 2013: $1 multiplied by the average number of lives

  • October 1, 2013 – September 30, 2014: $2 multiplied by the average number of lives

  • October 1, 2014 and beyond: to be determined

For HRAs that must comply, there is a special rule to only count one covered life for each employee. Thus, a family of four covered by an HRA would result in only a $1.00 fee ($1.00 x the employee-participant only).

How to Calculate the PCORI "Number of Lives"

The revised Form 720 instructions confirm the three ways to count the "number of lives." Here's what the instructions state:

1. The actual count method. For policy years that end on or after October 1, 2012, issuers using the actual count method may begin counting lives covered under a policy as of May 14, 2012, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year.

2. The snapshot method. For policy years that end on or after October 1, 2012, but that began before May 14, 2012, issuers using the snapshot method may use counts from quarters beginning on or after May 14, 2012, to determine the average number of lives covered under the policy.

3. Form 5500 method. The member months data and the data reported on state forms are based on the calendar year. To adjust for 2012, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2012. For example, issuers using the member months number for 2012 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2012.

Tip: A good HRA Software Administrator will provide plan sponsors with reporting tools to assist employers with participant counts. 


For example, Zane Benefits' HRA Software platform provides a built-in participant count tool. The tool allows employers to easily count participants for the Form 720 PCORI research fees.

Topics: IRS
Originally published on June 11, 2013. Last updated September 9, 2020.


Additional Resources

View All Resources