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2024 PCORI Fees - When, Who, and How Much?

What are PCORI Fees?

PCOR fees, also known as PCORI fees (Patient-Centered Outcomes Research Institute fees), were established as part of the Affordable Care Act. These fees fund research to improve healthcare quality and outcomes. Employers with certain types of health plans are required to pay these fees annually.

Who Needs to Pay PCORI Fees?

Employers with the following types of health plans must pay PCORI fees:

  • Self-funded plans

  • Level-funded plans

  • Fully insured plans with Health Reimbursement Arrangements (HRAs)

  • Individual coverage HRAs

It's important to note that for fully insured plans without HRAs, the carrier is responsible for paying the PCORI fee.

Payment Deadline and Fee Calculation

For employers with plan years ending in 2023, the PCORI fee must be paid no later than July 31st, 2024. Here are some key points about the fee calculation:

  • The fee for calendar year plans that ended in 2023 is $3.22 multiplied by the number of covered lives under the plan.

  • This fee amount is adjusted annually for inflation.

  • Covered lives include both employees and their dependents enrolled in the plan.

Determining the Number of Covered Lives

Employers have the flexibility to choose one of four permissible methods to calculate the number of covered lives:

  1. Actual count method: Count the total number of covered individuals for each day of the plan year and divide by the number of days in the year.

  2. Snapshot method: Count the total number of covered individuals on a single day (or more) in each quarter and divide by the number of dates used.

  3. Snapshot factor method: Similar to the snapshot method, but count only employees and multiply by 2.35 to account for dependents.

  4. Form 5500 method: Use the number of participants reported on Form 5500 for the plan year.

It is crucial to use one of these methods to ensure accurate fee calculation. Employers should choose the method that best fits their record-keeping practices and plan structure.

Optimizing Fee Calculation

Employers can strategically select the method that results in the lowest employee count to potentially reduce the total PCORI fee amount. Here are some tips for optimizing fee calculation:

  • Compare the outcomes of all four methods to find the lowest count.

  • Consider seasonal fluctuations in employee numbers when choosing a method.

  • For plans with many single employees, the snapshot factor method may result in a higher count than necessary.

  • Keep detailed records of your calculations to justify your chosen method if audited.

Payment Process and Record-Keeping

The payment process for PCORI fees has some specific requirements:

  • PCORI fees cannot be paid online and must be submitted by check to the IRS.

  • Use Form 720, Quarterly Federal Excise Tax Return, to report and pay the fee.

  • Even though it's called a quarterly form, you only need to file it once a year for PCORI fees.

  • Make sure to use the correct payment voucher (720-V) when submitting your payment.

Employers should retain copies of payment records as the IRS may occasionally audit PCORI fee payments. Maintaining thorough records is essential for demonstrating compliance with fee payment requirements, especially during team transitions. Here's what to keep:

  • Copies of completed Form 720

  • Proof of payment (canceled check or bank statement)

  • Documentation of the method used to calculate covered lives

  • Any worksheets or calculations used to determine the fee amount

What happens if you miss a payment? While there's no specific penalty outlined by the IRS, there are some general guidelines. Check out our past blog on the subject for more details.

Common Mistakes to Avoid

When dealing with PCORI fees, be aware of these common pitfalls:

  • Missing the payment deadline (July 31st following the plan year end)

  • Incorrectly calculating the number of covered lives

  • Forgetting to include HRA participants in fully insured plans

  • Not keeping adequate records of payment and calculations

Seeking Professional Help

If you're unsure about any aspect of PCORI fee payments, consider seeking help from:

  • A qualified benefits consultant

  • An experienced tax professional

  • Your company's legal counsel

These experts can provide guidance tailored to your specific situation and help ensure compliance with IRS regulations. By staying informed, keeping a regular cadence & schedule of compliance requirements like PCORI fees, you can minimize the risks to your group health plan.

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