Frequently Asked Questions About the Patient-Centered Outcomes/Comparative Effectiveness (PCORI Fee)

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Frequently Asked Questions About the Patient-Centered Outcomes/Comparative Effectiveness (PCORI Fee)

Q1: What plans does the PCORI fee apply to?
A1: All plans that provide medical coverage to employees owe this fee. Medical coverage includes preferred provider
(PPO) plans, health maintenance organization (HMO) plans, point-of-service (POS) plans, high deductible health plans
(HDHPs), and health reimbursement arrangements (HRAs).

The fee does not apply to:

Q2: Does the fee apply to all medical plans?

A2: Yes, it does. There are no exceptions for small employers. There are no exceptions for government, church or not-for profit plans. Grandfathered plans owe this fee. Union plans must pay the fee on their covered members.

Q3: Who must pay this fee?

A3: The fee must be determined and paid by:

Q4: When is the PCORI fee due?

A4: The fee is due by July 31 of the year following the calendar year in which the plan/policy year ends. Grandfathered
plans owe this fee. Union plans must pay the fee on their covered members.

The fee initially applied from 2012 to 2019, based on plan/policy years ending on or after October 1, 2012, and before October 1, 2019. However, in December 2019, the Further Consolidated Appropriations Act, 2020 extended the fee to plan/policy years ending before October 1, 2029.

To view these fees and dates, click here.

Q5: How much is the fee?

A5: The fee is $1.00 per covered life in the first year the fee is in effect. The fee is $2.00 per covered life in the second year. In the third through seventh years, the fee is $2.00, adjusted for medical inflation, per covered life. For plan years that end on or after October 1, 2014, and before October 1, 2015, the indexed fee is $2.08. For plan years that end on or after October 1, 2015, and before October 1, 2016, the indexed fee is $2.17. For plan years that end on or after October 1, 2016, and before October 1, 2017, the indexed fee is $2.26. For plan years that end on or after October 1, 2017, and before October 1, 2018, the indexed fee is $2.39. For plan years that end on or after October 1, 2018, and before October 1, 2019, the indexed fee is $2.45. For plan years that end on or after October 1, 2019, and before October 1, 2020, the indexed fee is $2.54. For plan years that end on or after October 1, 2020, and before October 1, 2021, the indexed fee is
$2.66.

The fee is based on covered lives (i.e., employees, retirees, and COBRA participants and covered spouses and children). If, however, the plan owes the fee for HRA or health FSA coverage, it only needs to count the employees/retirees/COBRA participants – covered dependents are not counted for HRAs or health FSAs. Employees and their dependents who are residing outside the U.S. (based on the address on file with the employer) may be excluded.

Q6: What if the plan terminates?

A6: The fee is due for each plan year the plan was in effect.

Q7: What if a plan is new?

A7: The fee will be due for each year the plan is in effect. The rate for that plan year will apply (for example, if the first year is January 1, 2013 – December 31, 2013, the first fee will be $2.00 per covered life and will be due on July 31, 2014).

Q8: How is the fee calculated?

A8: Plan sponsors of self-funded benefits have several options to calculate the fee:

Q9: May an employer change its calculation method?

A9: The same method must be used throughout a reporting year, but it may be changed from year to year.

Q10: What if the employer sponsors multiple plans?

A10: If there are multiple self-funded plans (such as self-funded medical and HRA) with the same plan year, only one fee
would apply to a covered life.

If there are both fully insured and self-funded plans, a fee would apply to each plan unless the employee is only covered under one type of plan. The insurer would pay the fee on the insured coverage and the plan sponsor would pay the fee on the HRA.

Q11: How is the fee paid?

A11: The fee will be reported and paid on IRS Form 720 each July 31.

Q12: Is the fee tax-deductible?

A12: Yes, the fee is tax-deductible.

Q13: Is there a penalty for failure to file or pay the PCORI fee?

A13: Although the PCORI statute and its regulations do not include a specific penalty for failure to report or pay the PCORI fee, the plan sponsor may be subject to penalties for failure to file a tax return because the PCORI fee is an excise tax. The plan sponsor should consult with its attorney on how to proceed with a late filing or late payment of the PCORI fee. The PCORI regulations note that the penalties related to late filing of Form 720 or late payment of the fee may be waived or abated if the plan sponsor has reasonable cause and the failure was not due to willful neglect.

Q14: How does a plan sponsor correct a previously filed Form 720?

A14: If a plan sponsor already filed Form 720, then the plan sponsor can make a correction to a previously filed Form 720 by using Form 720X. For more information, see:

We would be more than happy to answer any questions you might have pertaining to this announcement. Please feel free to contact your account team, or email us at icomply@ibpllc.com.

This Compliance communication is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

For a downloadable PDF, click here.

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