PCORI Fee: A Few Practical Considerations

By Drew Cheney June 27, 2013

We recently wrote an article regarding the Patient-Centered Outcome Research Institute (PCORI) fee, a new requirement under the Affordable Care Act which will require many plan sponsors to file a Form 720 and pay an excise tax by July 31, 2013.  This post is a reminder of this filing requirement.  In addition, we would like to briefly mention a few of the more significant practical issues and considerations that we have encountered as we have started to deal with these filings.

• There are still many plan sponsors who are unaware of their obligation to pay the PCORI fee.  In part, this is because the universe of self-insured health plans to which the fee applies includes very limited self-insurance arrangements, for example health reimbursement arrangements (HRAs) under Code Section 105 which are designed solely to reimburse participants for some of the deductibles under the plan sponsor’s core health plan.
• The filing itself is extremely simple.
• Health flexible spending accounts (FSAs) under Code Section 125 which are funded solely via salary reductions (the most typical arrangements) are not subject to the fee.
• PCORI fees for HRAs and FSAs are based on the number of employees without counting spouses and dependents, whereas fees for health insurance policies and other self-insured health plans are based upon the number of plan participants plus spouses and dependents.
• For plans with year ends other than July, August, and September, filings due on July 31, 2013 can use “any reasonable method” to calculate the number of individuals to use as the basis for the fee.  This gives most plans, including those with a December year end, an unusually high degree of flexibility in calculating the fee for this year.
• The IRS website contains some helpful FAQs and a helpful chart regarding the fee.