The Patient-Centered Outcome Research Institute (PCORI) Fee is an annual fee that applies to the majority of HRA plans. IRS Form 720 is used to file and pay for this charge annually. It finances PCORI-led research to improve healthcare choices, effectiveness, and quality.
The amount for calculating the PCORI fee is $3.22 per covered life for 2024. The IRS states that the annual PCORI fee is calculated by multiplying the average number of lives insured by the corresponding dollar amount for the coverage year or plan year. When computing your PCORI charge, be cautious to verify with the IRS for the present year's value as the dollar value is modified annually for inflation.
To calculate the PCORI fee, an average of people insured by eligible self-funded insurance policies is considered. To compute the PCORI charge, the IRS offers three substitute ways to ascertain the average number of lives insured by a plan during the plan year. Let’s try to understand with examples.
Calculation formula: Total PCORI Fee = (Sum of lives covered each day of policy/plan year) / 365) * Current PCORI fee per life
Example: Total fee = (2000/365) * 3.22 = 17.64$
Calculation formula: Total Fee = (Sum of participants from designated dates in each quarter) / 4) * Current PCORI fee per life
Example: Total fee = ((100+150+150+200)/4) * 3.22 = (600/4) * 3.22 = 483$
Calculation formula: Toral fee = ((Total number of participants at year beginning + Total number of participants at year end) / 2) *Current PCORI fee per life
Example: Total fee = ((150 + 150) / 2) * 3.22 = (300/2) * 3.22 = 483$
According to Form 720, the PCORI fee must be reported and paid by issuers or plan sponsors on July 31st of the following calendar year, in which case the policy or plan year following is relevant.
As per the average number of lives covered by the plan or policy, the PCORI fee is usually separated into “applicable self-insured health plans” and “specified health insurance policies.” Fully insured health plans have a liability for paying back PCORI fees. The costs of the self-insured plan are done by the employer.
Determine Applicability: Based on the type of plan and employer contributions to HRAs Health FSAs, find out whether your health schedule is within PCORI fee regulation limits.
Compute the Fee: Using the accurate method, compute PCORI fees for the relevant plan year.
Fill out Form 720 completely: To file and pay the PCORI fee, make use of IRS Form 720, Quarterly Federal Excise Tax Return. The PCORI fee is listed in line 133 of Form 720, Part II. Generally, this form is filed annually by July 31 of the calendar year after the last day of the plan year.
Send Payment to the IRS: The filled-out Form 720 should be submitted to the IRS together with the PCORI fee payment. The payment may be made using a money order, the Electronic Federal Tax Payment System (EFTPS), etc.
Keep Documentation: To be used as a reference or in case of audits, keep documentation on the PCORI fee calculations and payments.
Seek Professional Help: Make sure to consider consulting tax experts or form 720 service providers like Simple 720 who specialize in employee benefits and taxes when ensuring precise compliance with PCORI fee rules.
The PCORI fee is submitted on Form 720. Although Form 720 is a quarterly return, it becomes an annual filing for PCORI only. The IRS notice guarantees that sponsors and issuers may apply any other method of determination for the year if it is carried out uniformly.
IRS instruction: On Part II, Number 133 of Form 720, sponsors and issuers may report separately the average life covered for health insurance plans versus self-insured plans. The total of the health insurance plans stated and the total amount levied in taxes make up for the total fees. However, If issuers and plan sponsors are filing Form 720 to report the tax liabilities for various quarters of a year, then make an appropriate entry on PCORI Tax.
You can check out form 720 instructions page to learn more about IRS regulations.
Information about Form 720 and PCORI form 720 instructions can be found on the IRS website (www.irs.gov). Find the latest version of this form there.
Example: For plan years with end dates that fall between September 1, 2022, and September 1, 2029, identify which quarter and the suitable plan year you are submitting.
Complete the Patient-Centered Outcomes Research Trust Fund Fee, part II IRS No.133. Part II of Form 720 is where you will report on the PCORI Fee. The process will be:
In Part III, you will elaborate on the payment of PCORI. If you pay by check or money order, make sure that the right information is entered.
Verify the form once to avoid errors. Make sure the form is signed and dated as required.
Send the filled Form 720 with payment as required in the PCORI form 720 instructions to the mentioned address. Make sure to save a copy for your documentation.
Fee Payment Methods: Self-insured employers make the payment of the yearly PCORI charge to the IRS. The insurance company pays the fee for fully covered employers, though premium changes may take the expense into account.
Paper filings are cumbersome when compared to online filing, which is easy, time-saving, and effective.
If you feel the paper filing is taking much of your time, consider online filing. Electronic submission of excise tax forms (Form 720) is possible through IRS e-file programs, which process the document faster and more accurately than mail submissions.
The filing of Form 720 excise tax is done through IRS-approved online filing software that can cost you less. Simple 720 streamlines and outperforms online form 720 PCORI fee excise tax filing procedures with ease.
The PCORI Fee enables the impressive work performed by the Patient-Centered Outcomes Research Institute on clinical effectiveness and health outcomes.
If you want to ease your PCORI fee payment process, reach Simple720 today for effective online filing.