The Affordable Care Act (ACA) established the Patient-Centered Outcomes Research Institute (PCORI) to fund research into the effectiveness, benefits, and harms of various medical treatments and interventions.
This research is funded in part by the PCORI fee – an annual fee paid by:
- Health insurance carriers on fully insured medical plans, and
- Employers that sponsor self-funded medical plans (including HRAs).
For most employers with fully insured group health plans, no action is required – their insurance carrier pays the PCORI fee. But if an employer sponsors a self-funded plan or a Health Reimbursement Arrangement (HRA), the employer is responsible for filing and paying the PCORI fee itself.
Excepted benefit plans – including most Flexible Spending Accounts (FSAs), dental plans, and vision plans – are not subject to the PCORI fee.
Filing and Payment of PCORI Fees
PCORI fees must be reported on the Quarterly Federal Excise Tax Return (Form 720) and remitted to the Internal Revenue Service (IRS) by July 31, 2025. Although Form 720 is a quarterly return, it is filed annually for PCORI purposes – specifically by July 31 of the year following the end of the applicable plan year.
- For policy/plan years that ended on/after October 1, 2024, and before October 1, 2025, the PCORI fee is $3.47 per covered life (employees and dependents), a 7.76% increase from the prior year.
- For policy/plan years that ended on/after October 1, 2023, and before October 1, 2024, the PCORI fee is $3.22 per covered life.
Fees must be submitted via the IRS’s Electronic Federal Tax Payment System (EFTPS).
Who Files?
- Fully Insured Plans: Carriers are responsible for paying the PCORI fee. No action is required by the employer.
- Self-Funded Plans (including level-funded arrangements): Employers are responsible for calculating, filing, and paying the PCORI fee. Level-funded plans are treated as self-funded for this purpose.
- The PCORI fee is tax deductible for employers with self-funded plans. Consult tax counsel to confirm treatment.
FSAs and Excepted Benefits
Most Health FSAs qualify as “excepted benefits,” and are not subject to the PCORI fee. To qualify as an excepted-benefit FSA:
- Eligibility: Employees offered the FSA must also be eligible for the employer’s ACA-compliant group health plan.
- Employer Contribution: The employer may contribute:
- Up to $500, or
- A dollar-for-dollar match of the employee’s contribution (but not more).
If an FSA meets these conditions (as most do), no PCORI fee is owed. If unsure, employers should consult their FSA administrator or ERISA documentation.
Health Reimbursement Arrangements (HRAs)
Employers that offer HRAs are responsible for the PCORI fee – but how the fee is calculated depends on what type of medical coverage the HRA is paired with:
- HRAs with fully insured plans: The employer must pay the PCORI fee based only on the number of employees with an HRA, not the total number of covered lives.
- HRAs with self-funded plans (including level-funded): There is no separate PCORI fee for the HRA, but the self-funded plan must pay the full PCORI fee based on all covered individuals.
- Individual Coverage HRAs (ICHRAs) and Qualified Small Employer HRAs (QSEHRAs) are also subject to the PCORI fee and must be filed and paid by the employer by the July 31 deadline.
Health Savings Accounts (HSAs)
HSAs are not subject to the PCORI fee since they are individually owned savings accounts and not group health plans.
However, a High Deductible Health Plan (HDHP) paired with the HSA is subject to the PCORI fee, like any other group medical plan.
- If the HDHP is fully insured, the carrier pays the fee.
- If the HDHP is self-funded, the employer must file and pay the fee.
Legal Counsel Recommended
Employers should consult legal counsel to confirm their PCORI filing responsibilities based on their plan structure and specific circumstances.