Updated Fees
The IRS just released Notice 2020-44 which announces the updated Patient Centered Outcomes Research Institute (PCORI) fees for the July 2020 filing date. The new fee will be $2.54 per covered person (up from $2.45 based on a statutory COLA factor). The new fee applies to plan years ending on or after October 1, 2019 and before October 1, 2020. This includes calendar year plans since the plan year end date falls within the date window.
The History
As background, PCORI fees were initially slated to terminate for plan years ending on or after October 1, 2019. However, the SECURE Act extended fees for ten additional years, through 2029.
Filing on Form 720
PCORI fees are reported and paid to the IRS on the Form 720. Form 720 is typically filed quarterly by businesses and the PCORI fees are added during the second quarter filing which is due by July 31, 2020. The IRS has not yet updated Form 720 or its instructions to reflect the new fee, but the IRS website indicates that these resources will be updated soon.
Self-Funded vs. Fully Insured
Employers with self-insured health plans, whose plan years end after October 1, 2019, should begin gathering the data necessary to calculate the PCORI fee amounts. Filing for fully insured plans is handled by the insurance carriers.
Transition Relief
The Notice provides transition relief for calculating the average number of covered lives for plan years ending within this timeframe. The IRS anticipated that some employers may not have foreseen the need to identify the number of covered lives for this period (since the law was just recently extended).
Plan sponsors are permitted to continue to use any of the existing three methods to count the number of covered lives. In addition, for plan years ending on or after October 1, 2019, and before October 1, 2020, plan sponsors may use any reasonable method for calculating the average number of covered lives (so long as it the method is applied consistently for the plan year).
