10-Year extension of Patient-Centered Outcomes Research Trust Fund fee The Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94), signed into law on December 20, 2019, has extended the Patient-Centered Outcomes Research Trust Fund fee imposed by Internal Revenue Code sections 4375 and 4376 for 10 years. As a result of this extension, the Patient-Centered Outcomes Research Trust Fund fee will continue to be imposed through 2029. The Affordable Care Act imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute (PCORI). The fee, required to be reported only once a year on the second quarter Form 720, Quarterly Federal Excise Tax Return and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan. The fee applies to policy or plan years ending on or after October 1, 2012, and before October 1, 2029. The PCORI fee is filed using Form 720. Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31. Please refer to the rates and dates chart for the filing due date and applicable rate depending upon the month a specified health insurance policy or an applicable self-insured health plan ends. Specified health insurance policies and applicable self-insured health plans The fee is imposed on an issuer of a specified health insurance policy and a plan sponsor of an applicable self- insured health plan. For more information on whether a type of insurance coverage or arrangement is subject to the fee, see the application chart. Calculating the fee Specified health insurance policies The PCORI fee is calculated on the average number of lives covered under a specified health insurance policy. Generally, issuers of specified health insurance policies must use one of the following four alternative methods to determine the average number of lives covered under a policy for the policy year. Actual count method Snapshot method Member months method State form method In addition, for policy years ending on or after October 1, 2019, and before October 1, 2020, issuers may use any reasonable method for calculating the average number of covered lives. If an issuer uses a reasonable method to calculate the average number of covered lives for policy years ending on or after October 1, 2019, and before October 1, 2020, then that reasonable method must be applied consistently for the duration of the year and the issuer must use the same method for all policies for which a liability is reported on Form 720 for that year. For more information on these methods to determine the average number of lives covered under a policy for the policy year, please see the final regulations PDF. Applicable self-insured health plans The PCORI fee is calculated on the average number of lives covered under and applicable self-insured health plan. Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year. Actual count method Snapshot method Form 5500 method 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. If a plan sponsor uses a reasonable method to calculate the average number of covered lives for plan years ending on or after October 1, 2019, and before October 1, 2020, then that reasonable method must be applied consistently for the duration of the plan year. For more information on these methods to determine the average number of lives covered under applicable self-insured health plans for the plan year, please see the final regulations. Reporting and paying the fee File the second quarter Form 720 annually to report and pay the fee no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. Issuers and plan sponsors who are required to pay the fee but are not required to report any other liabilities on a Form 720 will be required to file a Form 720 only once a year. They will not be required to file a Form 720 for the first, third or fourth quarters of the year. Deposits are not required for this fee, so issuers and plans sponsors are not required to pay the fee using EFTPS. Please see the instructions for Form 720 on how to fill out the form and calculate the fee. The payment, if paid through the Electronic Federal Tax Payment System, should be applied to the second quarter (in EFTPS, select Q2 for the Quarter under Tax Period on the "Business Tax Payment" page). Related items The IRS and the Treasury Department have issued final regulations PDF on this fee. Notice 2023-70 provides the adjusted applicable dollar amount for calculating the PCORI fee and the transition relief available for calculating the average number of lives for policy years and plan years that end on or after October 1, 2023, and before October 1, 2024. For information on the fee, see the questions and answers and chart summary. Form 720, Quarterly Federal Excise Tax Return, was revised to provide for the reporting and payment of the patient-centered outcomes research fee.
