The Patient-Centered Outcomes Research Institute (“PCORI”) is an independent nonprofit research organization that funds comparative clinical research, among other things.  PCORI is funded through annual fees — provided for in the Affordable Care Act — paid by insurers of fully-insured health plans and sponsors of self-insured health plans, including health reimbursement arrangements (“HRAs”) that are not excepted benefits (i.e., that do not reimburse certain coverage premiums and limit contributions to no more than $1,800 annually, as indexed, among other requirements).  The PCORI fee originally applied only to health plans with plan years ending after September 30, 2012, and before October 1, 2019.  However, the Bipartisan Budget Act of 2019 extended PCORI fees through 2029.

Dental plans and vision plans that are excepted benefits (i.e., are offered through a stand-alone insurance policy or are not integrated with a health plan), are not subject to PCORI fees.  Similarly, health flexible spending accounts that are excepted benefits (i.e., the maximum benefit payable does not exceed two times the participant’s salary reduction election or $500 plus the participant’s salary reduction election and other qualifying health plan coverage is made available to participants) are also excepted benefits not subject to PCORI fees.

PCORI fees usually are due on July 31.  However, for plan years ending in 2021, the PCORI fee due date is August 1, 2022, because July 31, 2022, falls on a Sunday.

IRS Notice 2022-4 recently provided adjusted PCORI fees.  For plans with plan years that ended on or after January 1, 2021, through September 31, 2021, the fee is $2.66 per covered life.  For plans with plan years that ended on or after October 1, 2021, through December 31, 2021, the fee is $2.79 per covered life.  Covered lives are employees, spouses, and dependents covered by the health plan.  Employers who maintain self-insured health plans and HRAs (both with the same plan year) do not have to pay a separate PCORI fee for HRA covered lives.  However, employers who provide coverage through a fully-insured plan (the PCORI fee for which will be paid by the insurer) and an HRA must pay a PCORI fee based on the HRA, but covered lives are limited to employees.

The IRS has provided helpful FAQs about PCORI fees, including information about permitted methods for counting covered lives.  See PCORI Fee FAQs.  Permitted methods include:

• Actual count method. Add the total number of lives covered under the plan for each day of the plan year and divide by the total number of days in the plan year.

• Snapshot method. Add the total lives covered on one or more days during each quarter of the plan year and divide by the number of days used. 

• Snapshot factor method. The number of lives covered on a date equals:  (a) the number of employees with self-only coverage and (b) the number of employees with other than self-only coverage multiplied by 2.35.

• Form 5500 method. The method used for calculating participants for Form 5500 reporting.  

The PCORI fee is reported using IRS Form 720, Quarterly Federal Excise Tax Return.  The PCORI fee can be remitted to the IRS electronically or by mail.