ISSUED 12/23/2020
Healthcare reform requires self-insured plan sponsors to complete and submit Form 720 (and its accompanying 720-V payment voucher), and pay the required Patient-Centered Outcome Research Institute (PCORI) fees, on July 31 immediately after
the last day of the applicable plan year. PCORI fees apply for plan years beginning 10/1/2012 and ending before 10/1/2029.
Plan sponsors of self-insured health plans and health insurers must pay fees equal to the applicable fee times the average number of covered lives. Fees must not be paid by the plan or with plan assets. Applicable fees:
Plan Years Ending | Fee Per Covered Life | Payment Due |
1/1/2020 - 9/30/2020 | $2.54 | 7/31/2021 |
10/1/2020 - 12/31/2020 | $2.66 | 7/31/2021 |
1/1/2021 - 9/30/2021 | $2.66 | 7/31/2022 |
10/1/2021 - 12/31/2021 | TBD | 7/31/2022 |
Self-insured plan sponsors can calculate the average number of covered lives using either:
• Actual Count Method – This cumbersome method requires a plan sponsor to count the actual covered lives on each day of the plan year and divide by the number of days in the plan year.
• Snapshot Method – Choose one or more days during each calendar quarter, add the covered lives on those dates, and divide by the number of dates used. Sponsors must use the same number of dates in each quarter, and the dates must be within three days of the comparable date in the other quarters. Note that a plan sponsor also may use a snapshot factor that counts the actual number of participants with individual coverage, plus 2.35 times the number of participants with other than individual coverage.
• 5500 Method – Sponsors who offer only individual coverage take the number of participants reported at the beginning of the plan year, plus the number reported at the end of the plan year and divide by two. Plan sponsors who offer coverage other than individual coverage must take the number of participants reported at the beginning of the plan year, plus the number reported at the end of the plan year. Sponsors wanting to use this method should be sure the relevant Form 5500 will be filed by July 31 – extensions are not permitted.
Self-insured sponsors must pay PCORI fees for participants covered through COBRA coverage, retiree-only coverage and certain HRA coverage.
If a plan sponsor offers a stand-alone HRA, it must use one of the methods above to count the average number of covered lives. Plan sponsors of an HRA integrated with an insured plan will pay a separate PCORI fee on the HRA covered lives, even though the insurer will pay for the covered lives under the insured plan. Plan sponsors of an HRA integrated with a non-account self-insured plan must report and pay PCORI fees, but do not have to double count folks in the HRA and the self-insured plan.
Healthcare reform requires insurers to report and submit PCORI fees for fully insured plans. Thus, insured plan sponsors have no independent reporting obligation and will simply reimburse the insurers, who presumably will bill plan sponsors upon remitting PCORI fees to IRS.