PCORI – what is it and why does it exist?
The Patient-Centered Outcomes Research Institute (PCORI) was created as part of the Affordable Care Act (ACA). Its goal is to fund research that compares the effectiveness, benefits, and risks of different medical treatments and services.
To support this mission, PCORI is funded in part by an annual fee paid by employers who offer certain types of health plans.
Who does it apply to?
If you offer a self-funded or level-funded health plan, you may owe this annual tax. That includes:
- Employers who take on the financial risk for employee health benefits
- Plans covering employees, spouses, dependents, retirees
- COBRA continuants are also “enrolled individuals” so they need to be included as well
Make sure you include everyone enrolled when calculating your total.
How much do I owe and how do I calculate it?
Our team at Generous Benefits recommends using the snapshot factor method. Here’s how it works:
- Pick a date for each quarter of your plan year, ideally the first day (e.g., 1/1, 4/1, 7/1, 10/1).
- Count the total covered lives on those dates.
- If your plan includes dependents, you can use the IRS blanket factor of 2.35 per employee instead of counting individually.
- Calculate the average number of covered lives across all four dates.
- Multiply by the applicable PCORI fee:
|
Plan Year End Date |
Fee per Covered Life |
|
Oct. 1, 2024 – Sept. 30, 2025 |
$3.47 |
|
Oct. 1, 2023 – Sept. 30, 2024 |
$3.22 |
|
Oct. 1, 2022 – Sept. 30, 2023 |
$3.00 |
When are PCORI fees due?
July 31st in the year following the last day of your policy plan year.
Plans that ended in January 2024 through December 2024 must file and pay by July 31, 2025.
How do I pay it?
You’ll use IRS Form 720 (Quarterly Federal Excise Tax Return). Here’s what to do:
- Complete Part II of the form. This section is specifically for PCORI.
- Enter the number of covered lives.
- Calculate your fee and include it on the form.
- Submit the form and pay electronically through the IRS website.
How long will this fee be required?
The PCORI fee has been extended through 2029, with final payments due by July 31, 2030 for plans ending in 2029.
Questions?
If you're unsure whether this applies to your business or need help calculating your PCORI fee, our team at Generous Benefits is here to help.
Explainer Video
Here is a video from Bret walking you through how to do these calculations using our online benefits platform, Employee Navigator:
Helpful resources:
