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Form 720 PCORI Instructions | Simple720
05-28-2024

Form 720 PCORI Instructions | Simple720

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You may have heard about the Patient-Centered Outcomes Research Institute (PCORI) and the associated expenses. However, what is PCORI and how is it relevant to your company? 

The Affordable Care Act (ACA) established PCORI, an independent organization that carries out research to assist healthcare customers in making better decisions for their individual needs and results. The ACA requires sponsors of self-insured health plans to pay a charge to finance PCORI.

Who must pay a PCORI fee? 

Here are some Form 720 PCORI Instructions for those who owe this fee: 

       Generally, prepaid health care plans with set premiums for health or accident coverage are known as specified health insurance policies that are subject to PCORI costs.

       Employers must pay the PCORI charge if your company provides a self-insured health plan, such as an HRA.

       However, if an integrated HRA is provided when combined with a self-insured plan from the same plan sponsor, it is not subject to PCORI. For the PCORI charge, the HRA and medical plan are considered a single plan. 

PCORI payments apply to organizations providing various benefits, such as: 

       Fully insured policies.

       Plans with self-insurance.

       HRAs.

       Health flexible spending accounts (FSAs) if employer contributions surpass $500 or the employee's contribution. 

Which plans do not have to pay the PCORI fee? 

The following health plans are exempt from the PCORI fee: 

       Government initiatives include the Children's Health Insurance Programme (CHIP), Medicaid, and Medicare.

       Insurance plans that solely include excluded benefits, such as dental or eye.

       Programs for wellness (so long as they don't offer substantial benefits in terms of therapy or medical care).

       Workers' compensation

       Policies that only protect workers from abroad.

       Medical savings accounts from Archer (MSAs).

       Hospital Liability Protection.

       Accident-only insurance. 

What is the cost of the PCORI? 

The PCORI charge is $3.22 per covered life for plans ending on or before October 1, 2024. This cost is effective from October 1, 2023. Source: IRS 

A yearly inflation adjustment is made to the amount by the Secretary of Health and Human Services. According to the Form 720 PCORI Instructions, if you owe a PCORI charge, you have until July 31st, the last day of the plan year. File the fee online to avoid the PCORI Penalty. 

What is the PCORI fee due in 2024? 

The due date for PCORI fee is July 31st every year. For plan years ending in 2023, the due date is July 31 2024, Wednesday. 

How to calculate the PCORI "number of lives"? 

There are three ways to calculate the fee as per the Form 720 PCORI Instructions published by the IRS: 

  1. The Actual Method: Add the total number of lives covered each day in the plan year then divide it by the total number of days in the plan year. 
  1. The Snapshot Method: Each quarter, take the total number of lives covered on one day in the first, second, or third month and divide it by the total number of dates you counted. 
  1. Form 5500 Method: Consider the total number of members listed on Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan, or Form 5500, Annual Return/Report of Employee Benefit Plan. 

If you provide numerous self-funded plans or an integrated HRA from a medical insurance provider, you also need to follow particular calculations for covered lives. 

To know in detail, you can read our blog on PCORI Fee Reporting. 

Conclusion 

The deadline for submitting IRS Form 720 and paying PCORI fees for the employers who qualify is July 31. 

Seamlessly file the PCORI Online with the IRS Authorized Simple720 today!

File Your Form 720 Now