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Your business has to understand the PCORI fee obligations if it offers a Health Reimbursement Arrangement (HRA). The Patient-Centered Outcomes Research Institute (PCORI) fee applies to some self-funded health plans, and HRAs are classified within this category. This guide covers how the aforementioned PCORI fee is applicable to HRAs, the calculation methods, and what to do for compliance using IRS Form 720.

The PCORI fee is a charge established under the Affordable Care Act (ACA) to fund research comparing the effectiveness of medical treatments and interventions. The PCORI fee amount is updated annually and must be reported and paid using IRS Form 720. For HRA, the fee is paid normally by the employer and not by the employee. HRAs without any group health plan are termed **Self-insured Health Plans** for which they are liable for the PCORI fee. Employers are required to file them annually even if they provide the HRA alone and not any other health coverage. 

Calculate your PCORI liability by determining average number of covered lives for the HRA. Since the HRAs include employee only coverage, employers would end up counting one covered life for each employee enrolled under the plan.

Use one of the IRS-approved methods: 

* Actual Count Method

* Snapshot Method

* Form 5500 Method (not common for HRAs). 

Determine the average number of lives and multiply it by the applicable fee rate for the plan year. For example, for plan years ending in September 2024, the rate is. 

The fee is filed and paid through IRS Form 720 and is usually payable by July 31 after the end of the plan year. This means that for most calendar year HRAs, the filing deadline will fall on July 31, 2025.

Steps for filing: 

1. Count covered lives.

2. Use the appropriate fee according to the plan year end.

3. Fill out IRS Form 720 (Quarter 2 filing).

4. Payment can be submitted by EFTPS or check. 

* Keep track of enrollment with precision throughout the year.

* Document the way you calculated covered lives. 

* Review the changes happening annually with the IRS regarding the PCORI fees. 

* Consult a taxes advisor or benefits administrator for complex HRA arrangements. 

All employers offering Health Reimbursement Arrangements (HRAs) need to pay particular attention to their PCORI filing obligations. Increasing compliance scrutiny alongside annual changes to IRS rates makes it essential to stay updated on IRS changes and compliance requirements. File IRS Form 720 in a timely manner, accurately calculating your PCORI liability and ensure thorough record-keeping in compliance with avoiding penalties therein.