It’s that time of year again. Time for self-insured health plan sponsors to prepare to report and pay the annual Patient-Centered Outcomes Research Institute (PCORI) fee that was established by the ACA. Although originally established for plan years ending from October 1, 2012 through September 30, 2019, the fee has been extended for another 10 years, now covering plan years ending through September 30, 2029.
If your plan is fully-insured, then the issuer of the policy reports and pays the fee. However if your health plan is self-insured and/or you offer a health reimbursement arrangement or certain flexible spending arrangement, then the plan sponsor must file and pay the fee.
The fee is reported each year on a second quarter Form 720, which is due July 31 and is based on the average number of lives covered by the applicable plan or policy. For plan years ending in 2019 and reported on a 2020 Q2 Form 720, the fee is $2.45 per covered life if the plan year ended before October 1 or $2.54 per covered life if the plan year ended after September 30.
Normally there are three choices with regards to the method plan sponsors can use for calculating the number of covered lives subject to the fee:
- The Actual Count Method – The average of the number of covered lives on each day of the year (average of all 365 days if a full year).
- The Snapshot Method – Generally, the average of the number of covered lives on a given date in each quarter of the year; for example, the average of the enrollment on January 1, April 1, July 1, and October 1. For plans offering other than self-only coverage, covered lives can be determined using either the snapshot count method or the snapshot factor method to account for all covered lives including dependents.
- The Form 5500 Method – For plans with self-only coverage, the sum of beginning of year participants plus end of year participants reported on the Form 5500, divided by 2; or for plans offering coverage other than self-only, the sum of beginning of year participants plus end of year participants reported on the Form 5500.
Didn’t keep track of the specific details for determining the count this year because you thought the fee was no longer required? Not to worry, the IRS recently released Notice 2020-44 providing relief for plan years ending between October 1, 2019 – September 30, 2020; for the plan year ending during that period, plan sponsors can use any reasonable method to determine the average number of covered lives subject to the fee.
If your health plan is self-insured or you offer an HRA, please contact us with any questions. The Barnes Dennig Employee Benefit Plan Team can assist with determining fee applicability, minimizing the fee by calculating the lowest permissible covered life count, and/or preparing the Form 720.