Guidance for Self-Insured Health Plans and Payment of PCORI Fees: IRS Revises Form 720


For plan sponsors and insurers wondering how to pay the fee for the Patient-Centered Outcomes Research Institute (which is due by July 31, 2013 for calendar year plans), the IRS has revised Form 720 to provide needed guidance.

The Affordable Care Act added Section 4376 to the Internal Revenue Code, which imposed a fee on  group health plans. The fee is intended to partially fund the Patient-Centered Outcomes Research Institute (which was formed as part of the Affordable Care Act). Often referred to as the “PCORI fee,” or sometimes the “Section 4376 fee,” it is applicable to plan years ending on or after Oct. 1, 2012, and extends through plan years ending before Oct. 1, 2019. For self-insured plans, the plan sponsor is responsible for paying the fee; for insured plans, the insurer is responsible.

The fee must be paid no later than July 31 of the year following the last day of the covered plan year. For  plans that operate on a calendar year, the PCORI fees for 2012 will be due by July 31, 2013. Initially, the fee equals $1.00 multiplied by the average number of covered lives in the group health plan. The PCORI fee jumps up to $2.00 for the second year, and thereafter it is indexed for increases in national health expenditures. (Note that the PCORI fee applies to governmental and church-sponsored health plans, which are often exempt from benefit-plan regulations; the PCORI fee also applies to retiree health plans, but does not apply to plans for specialized benefits, such as dental plans or health flexible spending accounts.)

New Guidance
The fee is to be paid with IRS Form 720, but until recently Form 720 (and the associated instructions) made no mention of the PCORI fee, and it was unclear how an employer was to report the fee. On June 3, 2013, the IRS posted on its website an updated Form 720, as well as accompanying instructions. The new form now contains in Part II (lines marked “IRS No. 133”) a section for reporting the PCORI fee. The new Form 720 and associated instructions can be found at:

Unfortunately, the new Form and instructions raise a few questions. The instructions state that the PCORI fee associated with insured plans should be added to the fee for self-insured plans and the total reported on line 133. It is unclear how this is supposed to work, since two different parties (insurers for insured plans and plan sponsors for self-insured plans) are responsible for the fees. Up to this point it was assumed that insurers and plan sponsors would file their own Form 720, and it is hard to see how that could be otherwise. Note also that the revised Form shows a revision date of April 2013, which is a bit odd because the Form 720 posted on the IRS website between April 2013 and June 3, 2013 also showed a revision date of April 2013, but did not address the PCORI fee at all.

As a final tip, remember that although IRS Form 720 is set up for quarterly payments of various excise taxes and fees, the PCORI fee is strictly an annual payment.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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