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Under the Affordable Care Act (ACA), the Patient-Centred Outcomes Research Institute (PCORI) fee is an obligatory fee that funds comparative clinical effectiveness research. It must be paid by employers sponsoring certain self-insured health plans or Health Reimbursement Arrangements (HRAs) by filing IRS Form 720. It is very important for plan sponsors to understand who must pay the PCORI fee, how to calculate it, and their associated reporting due dates. Noncompliance could eventually lead to penalties and interest.

PCORI fees usually apply to employers offering self-paid group health plans, including HRAs tied to fully insured plans. Insurance carriers typically pay the PCORI fee on behalf of fully insured plans, while the self-insured ones relate back to employers. It is essential to understand the specifics concerning the plan year, average number of covered lives, and pertinent calculation methods; Actual Count Method and/or Snapshot Method, Important for accurate IRS Form 720 filing.

Plan sponsors will file IRS Form 720, (Quarterly Federal Excise Tax Return) each year on July 31 for the prior year, in order to ensure compliance with the PCORI fee requirement. Even if the name may imply a quarterly return, the PCORI fee in fact is only reported on an annual basis. Employers must make sure that they apply the correct PCORI fee rate published by the IRS annually and must determine must accurately determine the number of covered individuals the number of covered individuals in order to avoid any potential underpayment.

Remain abreast of IRS guidance for PCORI fees to avoid compliance problems. Utilize resources like IRS instructions, benefits consultants, or tax professionals to stay ahead. By doing so, you affirm your business as one that upholds health plan compliance and insulates itself from some audit risks.