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Information for Filing Comparative Effectiveness Tax (PCORI Fee) in July 2021

Overview

The Affordable Care Act imposes a fee on health insurers and plan sponsors of self-funded health plans to help fund the Patient-Centered Outcomes Research Institute (PCORI). PCORI uses those funds to promote research that offers patients and caregivers the information they need to make important healthcare decisions.

Employers may recall that PCORI fees were previously scheduled to sunset for plan years ending after September 2019. However, Congress extended these fees through September 30, 2029, as part of the Further Consolidated Appropriations Act of 2020.

Filing and payment must be submitted to the IRS by July 31, 2021, for your plan year that ended in 2020. The fees owed are as follows:

  • For plan years ending before October 1, 2020: $2.54 per covered life
  • For plan years ending on or after October 1, 2020: $2.66 per covered life

‘Plan year’ is generally the 12-month period stated in the Summary Plan Description, or for plans filing a Form 5500, the plan year stated in that filing. NOTE: The plan year may be different from the benefit year or the renewal period.

How to Access Your MedCost Provided PCORI Reports

In an effort to assist you with this filing, MedCost has calculated the average number of covered lives for your appropriate plan year utilizing three of the calculation methods permitted by the ACA: the Actual Count Method (daily), the Snapshot Method (monthly), and the Snapshot Factor Method

The reports that contain these calculations for your plan will be available on the employer portal of the MedCost website by June 11, 2021. You may elect to use any method to calculate your tax liability; simply multiply the number titled ‘average number of covered lives’ by the fee. 

As noted above, the filing and payment must be submitted to the IRS by July 31, 2021.

To access your files:

  • Go to www.MedCost.com.
  • Click on “for Employers” in the header at the top of the page.
  • Under “My Account,” select “Login” and enter your username and password.
  • Choose “Employer Reports.”
  • Select the “PCORI Reports” folder. 
  • Choose the current report. 

Your reports will be available by June 11, 2021.

How to Pay PCORI Fees

Per the IRS, plan sponsors are responsible for paying the fee, which is treated as an excise tax. A Quarterly Federal Excise Tax Return (Form 720) must be used when reporting liability for the fee. The 2021 form can be accessed at https://www.irs.gov/pub/irs-pdf/f720.pdf. The IRS has yet to release an updated version of the instructions for completing and filing this form that reflects the 2021 PCORI fees. The current version of the instructions is currently available at http://www.irs.gov/pub/irs-pdf/i720.pdf. We expect the IRS to post the updated version at the same website address very soon. 

Completion of the form is quite simple; only the relevant parts of the form need to be completed, which includes:

  • Identifying information at the beginning of the form (Please note, for the purpose of this form, this is considered a filing for the 2nd quarter, ending June 30, 2021.)

  • Part II, line 133 (“Applicable self-insured health plans” line)

  • Part III, items 3 and 10

  • The signature section

  • The voucher form, if the form is mailed

  • The form may be filed electronically or mailed to the Internal Revenue Service.

Additional helpful information

  • The plan sponsor must apply a single calculation method in determining the average number of lives covered under the plan for the entire plan year. However, the plan sponsor is not required to use the same method from one plan year to the next.
  • A self-insured Health Reimbursement Account (HRA) is not subject to a separate fee if the HRA is integrated with another applicable self-insured health plan that provides major medical coverage. The HRA and the other plan must be established or maintained by the same plan sponsor with the same plan year. However, if a self-insured HRA is integrated with an insured group health plan, then the fee must be paid for both the self-insured product and the insured product.
  • Excepted benefits (as defined under section 9832c of the U.S. Code) are exempt from the fee, as is a health Flexible Spending Account (FSA) that satisfies the requirements of an excepted benefit. 
  • If a HRA or health FSA is determined to be subject to the fee, the regulation permits the plan sponsor to assume one covered life for each employee with a HRA and for each employee with a health FSA (due to the unavailability of information on the lives covered – dependents – under a HRA or Health FSA).
  • All plans that provide medical coverage to employees owe this fee. There is no exception for small employers, or for government, church or not-for-profit plans, nor for grandfathered plans or union plans. The fee is tax-deductible.
  • For more information, see:   
  1. An IRS FAQ: https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-trust-fund-fee-questions-and-answers
  2. An IRS chart that shows which plans owe the fee: https://www.irs.gov/uac/Application-of-the-Patient-Centered-Outcomes-Research-Trust-Fund-Fee-to-Common-Types-of-Health-Coverage-or-Arrangements      

NOTE: The information we have provided is related to the self-funded group health plan that MedCost Benefit Services administers for you. You may have additional tax obligations for other benefit plans that you offer to your employees. Please consult with your tax advisor for guidance.

If you have questions about any of this information, please contact your MedCost Account Manager. Thank you for allowing us to serve you.