The annual filing (and fee payment) for applicable self-insured health plans and specified health insurance policies used to fund the Patient-Centered Outcomes Research Institute (the PCORI fee) is soon coming due—this year, by Monday, August 2, 2021.
IMPORTANT NOTE: The Form 720 on which the fee is reported typically is due on July 31; however, in 2021, July 31 falls on a Saturday, and, according to the Instructions (on page 2), if the due date falls on a Saturday, Sunday, or legal holiday, you may file on the next business day. And, so, this year’s filing is due by August 2, 2021.
Internal Revenue Service (IRS) Form 720, Quarterly Federal Excise Tax Return, is still used to report and pay (in Part II, IRS No. 133, on page 2) the annual PCORI fee. The applicable rate has increased to $2.66 per covered life (announced in late 2020 via IRS Notice 2020-84).
For an insured plan, the filing obligation still falls on the insurer. However, for an “applicable self-insured health plan,” the filing obligation lies with the plan sponsor. Applicable self-insured health plans include self-insured major medical coverage and health reimbursement arrangements (HRAs) for both employees and retirees, but do not include “excepted benefits” (e.g., most health flexible spending arrangements (health FSAs), standalone dental or vision plans, certain employee assistance programs (EAPs) that do not provide significant benefits in the nature of medical care, etc.). The IRS provides a helpful chart to help identify the plans to which the PCORI fee applies.
The PCORI fee is currently calculated at $2.66 times the average number of lives covered for the plan year (determined using one of the IRS’s prescribed counting methods; see the IRS PCORI page here for information about the counting methods). This current rate will apply to a 2020 calendar year plan year. However, for a non-calendar year plan year ending before October 1, 2020, the prior year’s PCORI fee rate of $2.54 will apply on this filing (and will increase to $2.66 on next year’s filing).
For example, for an employer that in 2020 sponsored an insured major medical plan (policy operated on a calendar year plan year) that was integrated with an HRA (also operated on a calendar year plan year), the insurer will have the filing obligation for the average number of lives covered by major medical in 2020 (times $2.66) for the insured major medical, but the employer will have a filing obligation for the average number of lives covered by the HRA in 2020 (times $2.66), and both such filings are due by August 2, 2021.
If the same employer in 2020 instead sponsored a self-insured major medical plan that was integrated with an HRA, that employer could generally treat the medical plan and HRA as a single applicable self-insured health plan to count the average number of covered lives (times $2.66, to determine the fee), and that filing is due by August 2, 2021.
If you have questions regarding the information in this reminder, please contact any of the attorneys in our Employee Benefits Practice Group.