2024 PCORI Fee Filing Reminder
June 6, 2024
The IRS releases a Form 720 with updated dates and fees on Line 133 annually for reporting the PCORI fees. You can find the form, with a revision date of June 2024, here.
Employers who sponsored self-funded medical plans that ended sometime during 2023 are required to report and pay the ACA Patient-Centered Outcomes Research Institute (PCORI) fees no later than July 31, 2024. The Form 720 should be filed for the 2nd quarter ending June 30, 2024.
Background
General summary information for PCORI fees can be found here.
Health insurance carriers pay the fee on behalf of fully-insured plans, but employers are responsible for reporting and paying the fee for any self-funded group health plans, including HRAs. The PCORI fee applies to most group health plans, but not to excepted benefits. The IRS published a chart that describes the different types of plans subject to the fee.
The fee is paid using quarterly excise tax Form 720, Line 133, and must be paid by July 31st of the year following the last day of the plan year. We recommend reporting the PCORI fee in the 2nd quarter of the calendar year following the end of the plan year, rather than filing sooner, to avoid any confusion for the IRS over which plan year the reporting applies to. If any corrections need to be made for prior years, use Form 720X.
Fee Amount
Payment amounts due in 2024 will differ based on the employer’s plan year. The IRS put together a chart showing applicable fee amounts depending on the plan year end date The fees due in July 2024 are as follows:
- $3.00 per covered life for plan years ending on or after October 1, 2022 and before October 1, 2023.
- $3.22 per covered life for plan years ending on or after October 1, 2023 and before October 1, 2024.
Calculating the Average Covered Lives
Self-funded plans may use one of three methods to determine the average covered lives used for reporting and paying the PCORI fee: (i) the actual count method; (ii) the snapshot method; or (iii) the Form 5500 method. There are special rules that apply for employers offering multiple self-funded plans or an HRA integrated with a fully-insured plan.
- Multiple Self-Funded Plans – If one plan sponsor maintains more than one self-funded health plan with the same plan year, the arrangements can be treated as a single plan for purposes of the fee.
- HRAs – An employer who sponsors an HRA integrated with a fully-insured medical plan is required to pay the fee only with respect to each HRA participant/employee (not required to count dependents or beneficiaries).
Failure to Pay the Fee
The IRS has not provided formal guidance for entities that fail to pay the PCORI fee, but it is generally advisable to file a Form 720 for the applicable year (or Form 720X for an amendment) as soon as possible for any missed fees and to pay any associated fines or penalties. A separate Form 720 should be filed for each missed plan year rather than paying fees for multiple plan years on the same Form 720.
The PCORI rules do not contain a specific penalty for failure to report or pay the PCORI fee, but since this fee is considered an excise tax, any related penalty for failure to file a return or pay a tax would seem to apply. Code §6651 includes the following penalties for failure to file a return or pay taxes.
- For failure to file the Form 720, the penalty is 5% of the excise tax due for each month or part of a month the return is late, with a cap of 25% of the unpaid tax. However, the minimum penalty for failure to file within 60 days of the due date, including extensions, is the lesser of an indexed amount ($435 in 2024) or the amount of tax owed with the return.
- For failure to pay the PCORI fee, the penalty is .5% of any tax not paid by the due date for each month or part of a month the tax remains unpaid, up to 25% of the unpaid tax.
On top of the penalties, interest can be charged on unpaid excise taxes. On the other hand, in some cases, penalties may be waived if the plan sponsor has reasonable cause and the failure to pay was not due to willful neglect.
For more details on the PCORI fees, see our summary found here.
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