It is often referred to as the “belly button” tax since it is paid for every “belly button” (or person) covered by the plan, not just for employees. The PCORI fee helps fund the Patient-Centered Outcomes Research Trust, which was established as part of the Affordable Care Act (ACA) to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, manage, diagnose or prevent illness or injury. Under the ACA, most employer sponsors and insurers were required to pay PCORI fees until 2019 or 2020, as it only applied to plan years ending on or before September 30, 2019. However, the PCORI fee was extended to plan years ending on or before September 30, 2029, as part of the Further Consolidated Appropriations Act, 2020. The IRS released the 2025 update to the annual Patient Centered Outcomes Research Institute (PCORI) fee. As a reminder, the PCORI fee was initiated as part of the Affordable Care Act to fund patient-centered research relating to health care.
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This alert was prepared for Alera Group by Barrow Weatherhead new pcori fee released Lent LLP, a national law firm with recognized experts on the Affordable Care Act. This alert was prepared for Woodruff Sawyer by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on ERISA, Affordable Care Act.
- There is no action that is required by employers at this time as the applicable Form 720 will not be available until late Spring 2025.
- The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated.
- The average number of covered lives for the plan year is generally calculated using the snapshot, snapshot factor, actual count, or Form 5500 method.
- The 2024 reference year RxDC Reporting Instructions have been released, though there were no changes to the reporting requirements or data elements from last year.
- There is no action that is required by employers at this time, as the applicable Form 720 will not be available until late Spring 2025.
There is no action that is required by employers at this time as the applicable Form 720 will not be available until late Spring 2025. We reviewed certain aspects of this financial audit and found no significant issues requiring attention. Between constantly changing employment laws and updates to the Affordable Care Act (ACA), keeping your workplace compliant can be a time-consuming and costly challenge. View compliance alerts and get a bird’s eye view of what you need to do to avoid fines and penalties. In December 2019, the Further Consolidated Appropriations Act of 2020 extended the PCORI fee for 10 years, so it continues to apply to all plan years ending on or before September 30, 2029. PCORI’s Chief Financial Officer provided technical comments, which GAO incorporated in the final report.
It was established to fund and evaluate research aimed at helping patients, doctors, and policymakers make better health care decisions. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts. 3801 (the Employer Reporting Improvement Act), which will positively impact applicable large employers (ALEs) and other entities required to furnish Forms 1095-B or 1095-C to individuals. There is no action that is required by employers at this time, as the applicable Form 720 will not be available until late Spring 2025. Winston Takeaway – Employers and insurers will need to calculate the fee, file IRS Form 720, and pay the 2023 PCORI fee by July 31, 2024. The PCORI fee for plan years ending on or after October 1, 2024, and before October 1, 2025, will be $3.47 per covered life.
What is the Patient-Centered Outcomes Research Institute (PCORI) Fee?
With the 2024 reference year RxDC reporting deadline approaching in June, plan sponsors should refamiliarize themselves with the reporting requirements. The 2024 reference year RxDC Reporting Instructions have been released, though there were no changes to the reporting requirements or data elements from last year. IRS instructions for filing Form 720 include information on reporting and paying the PCORI fees, while the PCORI Overview page provides details on calculating the fee amount.
PCORI fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). These fees are due each year by July 31 of the year following the last day of the plan year. This means that, for plan years ending in 2022, the PCORI fees are due by July 31, 2023.
PCORI was established under the Affordable Care Act to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, diagnose, manage or prevent illness or injury. The PCORI fee requires insurers and employers with self-funded group health plans to pay an annual fee to fund PCORI research. The PCORI fee requirement is currently scheduled to expire after 2029 or 2030, depending on the contract or plan year. The annual fee is calculated by multiplying the PCORI fee times the average number of lives covered on the health plan. There are multiple methods that can be used to calculate this average, including the Actual Count method, the Snapshot method, and the 5500 method.Note that the calculation is based on average covered lives, not average employees.
IRS Releases PCORI Fee For Plan Years Ending Before October 1, 2025
This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader.
The Patient Protection and Affordable Care Act requires PCORI to obtain an annual financial statement audit from a private entity with expertise in conducting financial audits. The act includes a provision for the Comptroller General of the United States to review the audit and report the results to the Congress annually. GAO’s objective was to review the results of PCORI’s fiscal year 2024 financial statement audit. This report presents the results of GAO’s review of PCORI’s fiscal year 2024 financial statement audit. PCORI is a federally funded, nonprofit corporation that is neither an agency nor establishment of the U.S. government.
Self-insured plan sponsors should use IRS Form 720 (Quarterly Federal Excise Tax Return) for the second quarter of the calendar year to report and pay the PCORI fee. Issuers of health insurance policies are responsible for paying the PCORI fee for insured plans. Employers that sponsor self-insured group health plans must report and pay PCORI fees using the second-quarter IRS Form 720, Quarterly Federal Excise Tax Return. The second-quarter form is generally not released by the IRS until the second quarter of the applicable filing year (usually in or around May of the applicable filing year). Therefore, the Form 720 used for the 2024 filing deadline will not likely be available until around May 2025, and employers who sponsor self-insured group health plans subject to the PCORI fee must wait to file until the correct Form 720 is available.
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- For example, if the employer missed filing its PCORI fees for the plan year ending in 2023 plan year, it would use the second-quarter Form 720 for 2024.
- PCORI’s purpose is to help patients, clinicians, policymakers, and others make informed decisions about health and health care options.
- The information is reported on IRS Tax Form Quarterly Federal Excise Tax Return.
- This institute is required to have its financial statements audited annually, and we’re required to review those audits.
Which plans are covered?
Both fully insured and self-funded health plans are required to pay the PCORI fee. However, the PCORI fee was extended to plan years ending on or before September 30, 2029 as part of the Further Consolidated Appropriations Act, 2020. The fee is calculated using the average number of lives covered under the policy or plan and the applicable dollar amount for that policy year or plan year. The information is reported on IRS Tax Form Quarterly Federal Excise Tax Return. Employers who sponsor self-insured plans subject to the PCORI fee are responsible for filing Form 720 and paying the fee. Active Paylocity clients with health reimbursement arrangement (HRA) services through Paylocity will receive an Average Covered Lives Report when the filing date nears.
Employers with a calendar-year health plan (with the plan year ending on December 31 each year) should have procedures in place to make sure they file IRS Form 720, Quarterly Federal Excise Tax Return, and pay their PCORI fee at a rate of $3.47 per covered life on or before July 31, 2025. The PCORI fee was mandated by the Affordable Care Act (ACA) to help fund research on the comparative effectiveness of medical treatments. The fees must be paid by July 31 following the last day of the plan year (e.g., for policy years and plan years ending on December 31, 2024, the fee is due by July 31, 2025). The IPA provided an unmodified audit opinion on PCORI’s fiscal years 2024 and 2023 financial statements. Specifically, the IPA found that PCORI’s financial statements were presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles. Further, for fiscal year 2024, the IPA did not identify any deficiencies in internal control that it considered to be material weaknesses or any reportable noncompliance with the selected provisions of laws, regulations, contracts, and grant agreements it tested.
The IRS website provides further details regarding the PCORI fee, including how to calculate the fee and the process for reporting and paying the fee. PCORI fees are annually reported and paid using IRS Form 720 (Quarterly Federal Excise Tax Return). The fee payment is due by July 31 of the year following the last day of the plan year.
Those reading this alert are encouraged to seek direct counsel on legal questions. Plan sponsors of self-funded plans must remit the PCORI fee to IRS annually along with an IRS Form 720. The payment and Form 720 must be remitted to IRS no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a payroll service provider are encouraged to seek the advice of a qualified CPA, tax attorney, or advisor.
The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments. The Patient-Centered Outcomes Research Institute is a federally funded, nonprofit corporation.