Yes, that PCORI Fee—it’s back!
About this time last year, we let you know that this filing and fee was coming due, and that it was the last time it would be required for a calendar year plan. Since that time, however, the requirement was extended another ten years (by the Further Consolidated Appropriations Act, 2020, signed into law on December 20, 2019).
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 due again this year, by Friday, July 31, 2020.
Internal Revenue Service (IRS) Form 720, Quarterly Federal Excise Tax Return, is still used to report and pay (in Part II, IRS No. 133) the annual PCORI fee. As of the date of this publication, the Form 720 and Instructions have not yet been updated to accommodate this extension, although we do know that the applicable rate has increased to $2.54 per covered life (announced June 5 via IRS Notice 2020-44).
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 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 $2.54 times the average number of lives covered for the plan year (determined using one of the IRS’s prescribed counting methods or, for policy and plan years ending on or after October 1, 2019 and before October 1, 2020, by any reasonable method pursuant to Notice 2020-44 (link provided above)). However, for a plan year ending before October 1, 2019, the prior year’s PCORI fee rate of $2.45 will apply on this filing (and will increase to $2.54 on next year’s filing).
For example, for an employer that in 2019 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 with respect to the average number of lives covered by major medical in 2019 (times $2.54) for the insured major medical, but the employer will also have a filing obligation with respect to the average number of lives covered by the HRA in 2019 (times $2.54), and both such filings are due July 31, 2020.
If the same employer in 2019 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 for the purpose of counting the average number of covered lives (times $2.54, to determine the fee), and that filing is due July 31, 2020.
The current Instructions to the Form 720 are available here (updates to the form and instructions, currently dated January 2020, are apparently in progress), and the IRS website has a page dedicated to the PCORI fee, here.
If you have questions regarding the information in this reminder, please contact any of the attorneys in our Employee Benefits Practice Group.