Under the Patient Protection and Affordable Care Act (PPACA), certain types of health insurance arrangements are required to pay a special fee. The fee is called the Comparative Effectiveness Research Fee, also referred to as the PCORI fee, and will be used to help fund the Patient-Centered Outcomes Research Institute. The PCORI fee is typically due by July 31st but since it falls on a Saturday this year, it is due August 2, 2021. The types of arrangements subject to this fee include:
- Fully insured medical plans
- Employer plans sponsored by private, government, churches, and not-for-profit organizations
- Individuals on a temporary U.S. visa who reside in the U.S.
- Retiree only plans
- Health Reimbursement Accounts (HRAs)
- Certain Flexible Spending Accounts (FSAs), if the employer contribution is greater than $500 and is more than the employee contribution
The fee is reported and remitted to the IRS using Form 720. The 2020 fees are detailed below:
|Plan Year Ending in 2020||Fee per Covered Life for July 31, 2021 Payment|
|Plan year ending on or after Oct. 1, 2020, through Dec. 31, 2020, including calendar year plans.||$2.66|
|Plan year ending on or after Jan. 1, 2016, through Sept. 30, 2020.||$2.54|
The PCORI fee is based on the average number of covered lives during the plan year. Covered lives include covered employees of the plan sponsor and all other covered dependents. The IRS has prescribed four methods for counting average number of employees.
In fully insured arrangements, insurance companies are required to pay the fee and file Form 720. Self-insured plan sponsors are required to both pay the fee and submit Form 720. Unlike other aspects of the Act, the PCORI fee requirement is applicable to all affected plans regardless of the employer’s size. Furthermore, the Department of Labor has indicated that the fee must be paid by the employer and not from plan assets.
Contact Mark Flanagan, Director of Aronson’s Compensation and Benefits Practice, at 301-231-6257 or email@example.com to further discuss the impact this requirement.