The IRS has released Notice 2024-83, which sets the applicable PCORI fee for plan years ending between October 1, 2024 and September 30, 2025 at $3.47 per covered life.
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 amount of PCORI fees due by employer sponsors and insurers is based upon the number of covered lives under each “applicable self-insured health plan” and “specified health insurance policy” (as defined by regulations) and the plan or policy year end date. The fee must be paid on or before July 31st each year. The fees due by July 31, 2025 are for plan years ending in 2024 and are as follows:
- For plan years ending between January 1, 2024 and September 30, 2024, the fee is $3.22 per covered life.
- For plan years ending between October 1, 2024 and December 31, 2024, the fee is $3.47 per covered life.
Insurance carriers are responsible for calculating and paying the PCORI fee for fully insured plans. The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA. In general, health FSAs are not subject to the PCORI fee.
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.
The average number of covered lives for the plan year is generally calculated using the snapshot, snapshot factor, actual count, or Form 5500 method. These counting methods will be described in more detail in a future alert as we approach the 2025 filing deadline.
Also note that because the PCORI fee is assessed on the plan sponsor of a self-insured plan, it generally should not be included in the premium equivalent rate that is developed for self-insured plans if the plan includes employee contributions. However, an employer’s payment of PCORI fees is tax deductible as an ordinary and necessary business expense.
Next Steps for Employers
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. In the meantime, if an employer believes they may have failed to file PCORI fees for one or more plan years prior to the plan year ending in 2024, they would need to file the Form 720 for the 2nd quarter of the applicable filing year that applies to the plan year missed. For example, if they missed filing their PCORI fees for the plan year ending in 2023 plan year, they would use the 2nd quarter Form 720 for 2024. Historical forms can be located on the IRS website. We recommend consulting with counsel to discuss the historical filing process.
More Information
For additional information, contact our Employee Benefits team.
This alert was prepared for OneGroup by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at [email protected] or [email protected].
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