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Q&As on Form 720 and PCORI Fees

July 16, 2015
form 720, PCORI fees

The Affordable Care Act includes a fee to be paid by sponsors of self-insured health plans to fund the Patient-Centered Outcomes Research Institute (PCORI). Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA) must pay this fee by July 31st each year via Form 720.

This fee was initially set to expire in 2019 but has been extended through September 30, 2029 as a result of the Further Consolidated Appropriations Act of 2020.

Q. Who owes a PCORI fee?

A. If your company offers a self-insured health plan, such as an HRA, you will need to pay the PCORI fee.

Q. How much is the PCORI fee?

A. For plan years ending on or after October 1, 2019, and before October 1, 2020, the fee is $2.54 per covered life (up from $2.45 in 2019).

Q. How to calculate the PCORI "number of lives"

A. According to Form 720 instructions, there are three ways to count the "number of lives." Here's what the instructions state:

  1. The actual count method: Add the totals of lives covered for each day of the play year and divide that total by the total number of days in the plan year.
  2. The snapshot method: Take the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second or third month of each quarter and divide that total by the number of dates on which a count was made.
  3. Form 5500 Method: Take the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.

You can view detailed information about “lives covered” in the final regulations document.

Q. Does our business need to submit IRS Form 720?

A. If you owe a PCORI fee for 2019, it must be paid using IRS Form 720 by July 31, 2020. For the purposes of self-insured health plans, see Part II, IRS No. 133 (b) of the form. If your business does not owe a PCORI fee, IRS Form 720 does not need to be completed.

If you currently file Form 720, the fee is to be paid with your second quarter return. If you do not file Form 720, you only need to file the form once, during the second quarter with your return.

Q. Are there other tax forms I need to file?

A. Depending on your organization’s size and the HRA you choose, you may need to file additional forms. See our A Summary of New Obamacare Tax Forms for more information.

Conclusion

For applicable employers, the deadline to submit IRS Form 720 and pay PCORI fees is July 31. For help completing this form, see our Help article: How to complete IRS Form 720 for the Patient-Centered Outcomes Research Institute (PCORI) Fee.

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