PCORI Reporting Notice 2023 for Self-Funded and Level-Funded Plans

 The annual PCORI report and payment of the PCORI fee is due by July 31, 2023. This is paid directly by the employer for self-funded and level-funded plans.  Employers with fully-funded plans are not responsible for submitting the PCORI report or fees, as they are paid through the insurance carrier.

This overview briefly summarizes PCORI and the steps required to file. The process is fairly straightforward to complete but can seem difficult to those unfamiliar with the steps involved.

 PCORI REPORTING OVERVIEW

“PCORI” stands for Patient-Centered Outcomes Research Institute. The PCORI fee, which is also sometimes called the Comparative Effectiveness Research Fee or CERF, is charged to health insurers and to employers offering self-insured plans. The fee is used to fund the PCORI Trust Fund, a part of the Affordable Care Act.

The purpose of the Institute is to conduct empirical research designed to improve the quality and relevance of evidence-based medicine. The PCORI fee was implemented in 2012 and is scheduled to sunset in October 2029.

PCORI FEE DUE DATE

The PCORI fee is due by July 31 of the year following the end of the plan year.

 PCORI FEE RATES

 The amount of the PCORI fee is calculated by multiplying the fee rate by the average number of insured participants (including dependents) during the plan year.

 PLANS REQUIRED TO SUBMIT PCORI REPORTS

 The IRS requires the following types of plans to prepare and submit annual PCORI reporting and the fees associated with it:

        Self-insured plans – single plan              Health insurers – single plan             

        Self-insured plans – multiple plans         Health insurers – multiple plans        

        COBRA and mini-COBRA coverage          Retiree coverage

        State / local plans                                       Health Reimbursement Arrangements (HRA)*

                                                                              Flexible Spending Arrangement (FSA)*

                                                                    *only if the HRA or FSA provider is different than the insurer.

As mentioned, the PCORI fee is paid by the health insurance company for employers with fully-funded plans. All fully-funded groups are combined into a single report of all participants nationwide, and a single check is sent in on behalf of all groups who are contracted with that particular carrier.

EXEMPTIONS FROM PCORI REPORTING

PCORI fees are not assessed on Employee Assistance Plans, wellness programs, or disease management programs, provided these programs do not provide substantial medical care or treatment.

Exemption is also granted to stand-alone dental or vision plans, Health Savings Arrangements (HSA), Archer Medical Savings Accounts (MSA), Medicare and Medicaid along with supplemental plans, Children’s Health Insurance Program (CHIP), disability income, worker’s compensation income, plans offered through the branches of the United States Armed Forces, or certain Native American tribal plans.

 METHODS FOR CALCULATION – SELF-INSURED PLANS (INCLUDING HRA & FSA PLANS)

There are three accepted methods for calculating the number of participants covered by a self-insured or level-funded plan:

Form 5500: Plan sponsors are permitted to use the data submitted on their annual Form 5500 “Annual Return/Report of Employee Benefit Plan” or Form 5500-SF “Short Form Annual Return/Report of Employee Benefit Plan for Small Employers.” 

Snapshot: Plan sponsors may take a “snapshot” of the number of persons covered on any one day in a fiscal quarter, use the same day and month of each of the other quarters, and then average the four numbers together to determine a reporting result. 

For example, the sponsor may take the total coverage on the third Friday of the second month of each quarter (or the second Monday of the third month, or first Thursday, etc.), use that same day/month calculation point for the other three quarters, and average these four numbers together.

Actual Count: Plan sponsors may take the total number of people covered for each day of the plan year and then divide that amount by the number of days in the plan year to obtain an average. 

If the plan covers the fees for the HRA or FSA programs, the fee is just paid once and is paid only for the employee, not for dependent spouses or children. This also holds true for COBRA participants and retirees who participate in an HRA or FSA plan.

If an employee participates in both a fully funded plan as well as in an HRA or FSA, a separate payment is required for both plans.  However, if the employer contributes less than $500 to an employee FSA account and offers a fully funded group health plan as well, the FSA is exempted from PCORI fee requirements.

It is permissible to change the method of calculation from one plan year to the next.

HOW TO REPORT PCORI FEES

PCORI fees are payable using Form 720 “Quarterly Federal Excise Tax Return” for the second quarter of each year. PCORI fees are reported in Part II of Form 720. The Form 720 is due by July 31 of each year. NOTE: Although Form 720 itself is a quarterly filing, payment of PCORI fees is only due annually with the filing for the second quarter.

Payments are to be made directly to the IRS.  The address to submit Form 720, 720X (if used),

Payment Voucher, and the payment made out to “United States Treasury” is:

Department of the Treasury

Internal Revenue Service

Ogden, UT

84201-0009

(NOTE: this is the national address for all PCORI filings, not just Utah employers.)

 HOW TO REPORT CORRECTIONS TO FORM 720

Corrections or revisions to Forms 720 which have previously been filed are to be made using the Form 720-X. This would include late filings as well as any adjustments which result in an overpayment. Adjustments are to be filed within three years from the date the original return was filed or was due.

Late payments may be subject to additional IRS penalties. Penalties related to late filing of Form 720 or late payment of the fee may be waived or abated, if the plan sponsor has reasonable cause and can show the failure was not due to willful neglect.

ENSURE REPORTING IS DONE RIGHT

If you or any of your team have questions about this material or want a more in-depth review of your situation, please contact HR Service Inc. at (801) 685-8400. We are set up to assist self-funded and level-funded groups to complete Form 720 and submit payment to the IRS. We’d be happy to help!

Prepared by David Norton

Human Resources Business Consultant