PCORI FEE Guide
What are PCORI Fees?
The PCORI fee is a charge that helps fund the Patient-Centered Outcomes Research Institute (PCORI)—an independent, non-profit organization that conducts research to improve healthcare decisions and outcomes.
This fee is paid to the IRS by:
- Health insurance companies (for fully insured plans), and
- Employers who offer self-funded health plans.
Originally, the PCORI fee only applied to plans or policy years ending on or before September 30, 2019. However, the Further Consolidated Appropriations Act of 2020 extended the fee for 10 more years. So now, it applies to any plan or policy year that ends before October 1, 2029.
Which Health Plans Are Subject to the PCORI Fee?
The PCORI fee applies to certain types of health coverage, particularly major medical plans and similar comprehensive benefits. It is assessed differently depending on whether a plan is fully insured or self-insured.
Health Plans Subject to the PCORI Fee:
1. Fully Insured Plans:
- For employer-sponsored plans purchased through a health insurance company, the insurer is responsible for paying the PCORI fee.
- However, if an employer offers a Health Reimbursement Arrangement (HRA) alongside a fully insured plan, the employer must pay the fee for the HRA portion.
2. Self-Insured Plans:
Employers that fund their own health plans must pay the PCORI fee directly. This includes:
- Major medical self-funded plans
- COBRA continuation coverage
- Retiree-only major medical plans
- Stand-alone HRAs
- Short year plans (less than 12 months of coverage)
3. Health Reimbursement Arrangements (HRAs):
- Subject to the PCORI fee if they are not integrated with a self-funded plan.
- If integrated with a fully insured plan, the HRA is still subject to the fee, paid by the employer.
- If integrated with a self-funded plan, the combined plan is counted once.
What PCORI Fee Amount Should I Report on the July 2025 Form 720?
The PCORI fee amount changes each year to account for inflation. The PCORI fee for health plan years ending between January 1 and September 30, 2024, is $3.22 per covered life. For plan years ending on or after October 1, 2024, and before October 1, 2025, the updated fee is $3.47 per covered life.
This fee must be reported and paid using the IRS Form 720 (Quarterly Federal Excise Tax Return). Even though Form 720 is filed quarterly, PCORI fees are only reported once a year, and for most plans, this is done with the second-quarter filing due by July 31, 2024.
PCORI Fee Calculations
The IRS allows plan sponsors of self-insured health plans to choose from three approved methods to calculate the average number of lives covered under the plan:
1. Actual Count Method - Counts the actual number of covered lives on each day of the plan year and divides by the number of days.
2. Snapshot Method - Averages the number of lives covered on a set date (or dates) in each quarter of the plan year. There are two sub-methods:
- Snapshot Count : Counts the actual number of covered lives on each day of the plan year and divides by the number of days.
- Snapshot Factor : Counts employees with self-only coverage plus a factor of 2.35 for those with other tiers.
3. Form 5500 Method - Uses participant counts from a filed Form 5500. The calculation varies based on whether the plan offers individual or family coverage.
Employers must choose one method per plan year and retain records to support their calculation
How Are Covered Lives Counted for the PCORI Fee (by Plan Type)?
Covered lives include employees, spouses, dependents, retirees, and COBRA participants. The count method depends on the plan type and the IRS-approved calculation method used.
Self-Insured Health Plans
Choose one method:
Actual Count - In this method Both Participants and dependents are taken into calculation.
- Total lives each day ÷ number of days in the plan year -
Snapshot Method - In this method Both Participants and Dependents are taken into calculation.
- Snapshot Count : Lives on selected dates per quarter.
- Snapshot Factor : Self-only participants + 2.35 × non-self-only participants.
Form 5500 - In this method Both Both Participants and Dependents are taken into calculation but with 2 different methods respectively.
- Self-only : (Participants at start + end of year) ÷ 2 - Only Participant
- Family coverage : Add both start and end counts (no division) - Participant and dependent
Fully Insured Plan with HRA
- Insurer pays PCORI fee for the insured plan.
- Employer pays PCORI fee for HRA.
- One covered life per employee with an HRA (dependents not counted).
Standalone HRA
- Treated as a self-insured plan.
- Count one covered life per employee (dependents excluded).
Retiree-Only Plans - The Number of lives covered is calculated based on the calculation method chosen.
- Use any IRS-approved method discussed above.
COBRA Participants
- Both Participants and dependents are included in the count.
NOTE:
- Only one method can be used per plan year.
- Keep documentation for IRS records.
Action Items for Employers / HR / Plan Sponsors
The plan sponsor is responsible for managing the entire PCORI fee process, from identifying plan eligibility to submitting payment. The key action items include:
Confirm Plan Applicability
HR must determine if the organization offers a self-insured health plan, HRA, or retiree-only plan that is subject to the PCORI fee.
Select a Calculation Method
Choose one of the IRS-approved methods—Actual Count, Snapshot Method, or Form 5500 Method—to calculate the average number of covered lives.
Determine the Fee Amount
Use the IRS-published PCORI fee rate that applies to the specific plan year.
Prepare Form 720
Complete the Quarterly Federal Excise Tax Return (Form 720), specifically the section for the PCORI fee.
File and Pay by Deadline
Submit Form 720 and payment to the IRS by July 31 of the year following the end of the applicable plan year.
Maintain Records
The employer should retain documentation supporting the calculation and payment for audit and compliance purposes.
PCORI Fee Reporting: Filing Methods
There are two methods for filing Form 720 to report and pay the PCORI fee:
Manual Method
In the manual filing method, HR or the plan sponsor must fill out Form 720 by hand and mail it to the IRS along with the payment.
- This method involves printing and physically submitting the form via postal mail.
- Payment is usually made via check or money order.
- Manual filing is a traditional approach, but it can be slower and more error-prone compared to electronic options.
Online Method
In the online filing method, you can submit Form 720 through an IRS-authorized e-filing provider like Simple720.
- This method is faster, more efficient, and IRS-recommended.
- You receive immediate confirmation of submission.
- It reduces the chances of calculation or data entry errors.
- Online portals guide you through each step of the process, making it easier for HR teams.
How to Fill Form 720 for Manual Filing?
- Always Download the latest version of Form 720 from the IRS website.
- Complete the general information at the top of the form (name, address, EIN, quarter ending June 30, 2024).
- Scroll to Part II of the form. Under IRS No. 133, enter the relevant details
- You need to clearly mention the number of lives covered. The fee is calculated by multiplying the number of lives with the applicable PCORI rate. The PCORI rate for 2025 is $3.47.
- Leave the rest of the sections blank unless you're reporting other excise taxes.
- Calculate the Total Tax in Part III, sign and date the form.
- Prepare a check or money order payable to the IRS Department of the Treasury
- Mail the completed Form 720 and payment to the official IRS mailing address
How to Report PCORI Online (via Simple720)?
Step 1 – Create an Account
Sign up for a free Simple720 account. Existing users can log in.
Step 2 – Enter Business Details
New users: Click “Add New Filings” → “Add New Business” and enter:
- Business Name
- EIN
- Business Type
- Contact Info
Returning users: Select a saved business profile.
Step 3 – Choose Form Type
Select Form 720 (Quarterly Federal Excise Tax). Choose the correct tax year and quarter, then click “Proceed.”
Step 4 – Select PCORI Category
From the left menu, expand Part 2 and choose IRS No. 133 (PCORI Fee).
Step 5 – Enter Tax Details
- Select policy type
- Enter average number of covered lives
The system will auto-calculate the tax (e.g., $3.47 per life for 2025).
Step 6 – Choose Payment Method
Select a payment option:
- Direct Debit (E-Withdrawal)
- EFTPS (Electronic Federal Tax Payment System)
Step 7 – Submit Filing
After payment, your PCORI filing is submitted electronically within minutes. A timestamped confirmation is available for download.
Which Plans Are Exempt from the PCORI Fee?
Not all health plans are subject to the PCORI fee. Certain types of coverage are specifically excluded, particularly those that are limited in scope or do not provide comprehensive medical care.
The following plans and programs are exempt from the PCORI fee:
- Government health programs such as Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). These are publicly funded and not considered applicable for PCORI fee purposes.
- Insurance policies that offer only expected benefits, like standalone vision or dental plans. These do not fall under the definition of applicable health coverage.
- Wellness programs, provided they do not offer significant medical care or treatment. If a wellness program is purely preventive or educational, it is not subject to the fee.
- Coverage for international employees only, where the policy does not extend to U.S.-based individuals.
- Archer Medical Savings Accounts (MSAs), which are individual-based accounts and not group health plans.
- Stop-loss coverage or hospital indemnity plans, which are not considered group health insurance.
- Accident-only policies, since they provide limited, event-specific benefits.
- Workers’ compensation plans, which are designed solely for job-related injuries and illnesses.
These exclusions are important to consider when determining whether a specific plan requires PCORI fee reporting and payment.
What Happens If You Don't Pay the PCORI Fee?
Filing and paying the PCORI fee on time is a critical compliance responsibility for employers offering self-insured health plans or HRAs. Missing the deadline or submitting incorrect information can lead to costly consequences.
Penalties for Late or Missed Filing
If you fail to file Form 720 or pay the PCORI fee by the IRS deadline (typically July 31), the following penalties may apply:
- Late Filing Penalty : 5% of the unpaid tax per month, up to a maximum of 25% of the total due.
- Interest Charges : The IRS may also apply interest on the unpaid balance until it is fully paid.
- 2013 : $1.00 for plans ending after Sept 30, 2012 and before Oct 1, 2013
- 2014 : $2.00 for plans ending after Sept 30, 2013 and before Oct 1, 2014
- 2015 : $2.08 for plans ending after Sept 30, 2014 and before Oct 1, 2015
- 2016 : $2.17 for plans ending after Sept 30, 2015 and before Oct 1, 2016
- 2017 : $2.26 for plans ending after Sept 30, 2016 and before Oct 1, 2017
- 2018 : $2.39 for plans ending after Sept 30, 2017 and before Oct 1, 2018
- 2019 : $2.45 for plans ending after Sept 30, 2018 and before Oct 1, 2019
- 2020 : $2.54 for plans ending after Sept 30, 2019 and before Oct 1, 2020
- 2021 : $2.66 for plans ending after Sept 30, 2020 and before Oct 1, 2021
- 2022 : $2.79 for plans ending after Sept 30, 2021 and before Oct 1, 2022
- 2023 : $3.00 for plans ending after Sept 30, 2022 and before Oct 1, 2023
- 2024 : $3.22 for plans ending after Sept 30, 2023 and before Oct 1, 2024
- 2025 : $3.47 for plans ending after Sept 30, 2024 and before Oct 1, 2025
Yes, fully insured plans are subject to the PCORI Fee, but the insurance carrier is responsible for paying it—not the employer. Employers do not need to file or pay the fee for fully insured plans.
However, if the employer offers a self-insured plan (like an HRA), they must pay the fee themselves. So, responsibility depends on whether the plan is fully insured or self-insured.
Self‑funded (self‑insured) plans are subject to the PCORI fee, and the plan sponsor (usually the employer) must file IRS Form 720 and pay it annually by July 31. The fee is calculated based on the average number of covered lives during the plan year, using one of three IRS‑approved methods: Actual Count, Snapshot, or Form 5500 methods.
If you sponsor multiple self‑insured plans, you may treat them as a single plan for fee calculation. Also, short plan years and HRAs are included and must be reported separately if integrated with fully insured plans
The PCORI fee funds the Patient-Centered Outcomes Research Trust Fund, created under the ACA. This trust supports research that compares the effectiveness of medical treatments. About 80% goes to PCORI for conducting studies, and 20% to HHS for research dissemination. The fee is reported using IRS Form 720. It ultimately helps improve healthcare decisions and outcomes.
The PCORI fee is paid using IRS Form 720, the Quarterly Federal Excise Tax Return. It can be filed either manually (paper filing) or electronically through the IRS-approved e-file system.
The IRS strongly recommends electronic filing due to its speed, accuracy, and instant confirmation. Manual filing is still accepted but may involve longer processing times. Employers must submit the form and payment annually by July 31 for the previous plan year.
Begin Your PCORI Fee Filings Now by Registering with Simple720!
Pay PCORI Fee Online!