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The Affordable Care Act (ACA) established the Patient-Centered Outcomes Research Institute (PCORI) to research and explore the effectiveness of medical treatments. PCORI focuses on patient-centered outcomes research (PCOR), studying the effectiveness, benefits, and harms of various medical treatments and interventions.
 
PCORI is funded through a combination of federal appropriations and fees collected from health insurers and self-insured employers. The fees are part of the PCORI Trust Fund, which supports the institute’s research activities. The PCORI fee is paid by issuers of fully insured plans (carriers) and by employers with self-funded plans. Excepted benefit plans, which include most FSAs, Dental plans, Vision plans, etc., 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, 2024. Although Form 720 is a quarterly return, it is filed annually for PCORI fee purposes, specifically by July 31 of the year following the last day of the policy/plan 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 person, a 7.33% increase from the previous year.
• For policy/plan years that ended on/after October 1, 2022, and before October 1, 2023, the PCORI fee is $3.00 per covered person.

 
 The PCORI fee is paid through the IRS’s Electronic Federal Tax Payment System (EFTPS).
 
Who Files?

• Fully Inured Plans: For fully insured plans, the PCORI fee is paid by the health insurer, not the employer. Therefore, employers do not need to take any action or file Form 720.
• Self-Funded Plans: For self-insured plans, the employer/plan sponsor is responsible for paying the PCORI fee. According to IRS guidance, the PCORI fee is tax deductible for employers/plan sponsors of self-insured plans as an ordinary and necessary business expense. Always consult tax counsel to ensure compliance and accuracy in all tax-related matters.

 
For detailed information on the PCORI fee, please review the IRS Patient-Centered Outcomes Research Trust Fund Questions and Answers. For information on the types of insurance coverage or arrangements subject to the PCORI fee, please review Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements.
In most cases, employers with fully insured plans will not be responsible for reporting or paying the PCORI fee. However, an employer is responsible for the fee if it sponsors self-funded coverage or a health FSA that is not an “excepted benefit.”
 
Excepted benefits, which include most FSAs, Dental plans, Vision plans, etc., are exempt from PCORI fee requirements.
 
Excepted Benefit FSAs
Most Health FSAs are “excepted benefits,” and are not required to remit PCORI fees. To qualify as an excepted-benefit FSA:

1. Eligibility: FSA-eligible participants must also be eligible for the employer’s ACA-compliant group Medical plan.
2. Employer Contribution: If the employer contributes a flat contribution into the employee’s FSA, the amount must not exceed $500. Or, if the employer makes a dollar-for-dollar match, it may not exceed the employee’s contribution.

 
Again, almost all compliant Health FSAs qualify as “excepted benefits” and are therefore exempt from PCORI fees.
 
If an employer is not sure if its Health FSA qualifies as an excepted benefit, it should contact its FSA administrator to confirm. The excepted-benefit status should be documented in the employer’s self-established ERISA documentation, which is typically prepared in consultation with an ERISA attorney.
 
Health Reimbursement Arrangements (HRAs)
Since the ACA was implemented, Health Reimbursement Arrangements (HRAs) must be integrated with group plans and are subject to PCORI fees. These fees are usually managed in coordination with the employer’s HRA Third Party Administrator (TPA).
 
HRAs integrated with fully insured health plans must pay the PCORI fee based on the number of HRA accounts, rather than the total number of covered lives.
 
HRAs integrated with self-funded plans (including level-funded plans) are generally not subject to a separate PCORI fee. However, the self-funded plan must pay the PCORI fee for all covered lives, not just the number of employees’ HRAs.
 
Both Individual Coverage HRAs (ICHRAs) and Qualified Small Employer HRAs (QSEHRAs) are required to pay the PCORI fee by the annual 7/31 deadline.
 
Health Savings Accounts (HSAs)
The PCORI fee does not apply to HSAs, as they are individual savings accounts, not health plans. However, the PCORI fee does apply to High Deductible Health Plans (HDHPs), which must be maintained for HSA account holders to make contributions.
 
Legal Council Recommended
It is crucial for employers to seek legal counsel to ensure full compliance with all relevant laws according to their own specific circumstances.