Yes, employers of self-insured plans are still required to pay the Patient-Centered Outcomes Research (PCOR) Institute fee for all plan years ending in 2018. The fee is generally due on July 31 of the year following the plan year end date, so the deadline for a plan year that ended in 2018 is Wednesday, July 31, 2019. Unless there is a change to the law, this will be the last year an employer sponsoring a calendar year plan will pay the PCOR fee.
As background, the PCOR fees are payable for plan years ending after September 30, 2012 and before October 1, 2019. If the plan is fully-insured, the insurance carrier is generally responsible for paying the fee. If the plan is self-insured, the plan sponsor is responsible for the fee. For this purpose, a plan sponsor is generally the employer for a single employer plan. Special rules apply for determining who is responsible in the situation of an association plan, MEWA, or VEBA. The IRS has a helpful chart to remind employers which types of plans are subject to the fee.
The PCOR fee generally does not apply to excepted benefits such as stand-alone dental and vision plans or most health flexible spending accounts (FSAs). However, the fee does apply to HRAs and retiree-only plans. There are four methods of calculation available (as detailed below).
The general rule is that the PCOR fee is based on the average number of covered lives during the plan year. Importantly, this includes not only employees, but also dependents (spouses, children, and others) as well as former employees still receiving coverage under the plan (former employees on disability who are still covered, retirees, COBRA participants, and so on). However, for an HRA plan, the fee is payable only on employees (not spouses and dependents). The IRS allows employers to use any one of four methods for calculating lives, as described below:
- Actual Count Method: Calculate the sum of the lives covered for each day of the plan year and divide that sum by the number of days in the plan year.
- Snapshot Method: Add the total number of lives covered on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the four quarters of the benefit year (provided that the date used for the second, third, and fourth quarters must fall within the same week of the quarter as the corresponding date used for the first quarter). Divide that total by the number of dates on which a count was made.
- Snapshot Factor Method: The calculation is the same as the snapshot method, except that the number of lives covered on a date is calculated by adding the number of participants with self-only coverage on the date to the product of the number of participants with coverage other than self-only coverage on the date and a factor of 2.35. For this purpose, the same months must be used for each quarter (for example, January, April, July, and October).
- Form 5500 Method: The plan may use the data reported on the most recent Form 5500. A plan may only use this method if it filed the Form 5500 by July 31. A plan filing an extension for the Form 5500 would have to use another calculation method. If a plan covers only employees, then the plan sponsor would add the number of participants at the beginning of the plan year and at the end of the plan year and divide by two. If the plan covers dependents, the plan sponsor would add the number of participants reported for the beginning of the plan year and the number of participants at the end of the plan year, and report this total.
Employers may switch methods from one year to the next, and should calculate the average number of lives under all four methods and choose the one that is most favorable.
The PCOR fee is filed and paid via IRS Form 720, Quarterly Federal Excise Tax Return. The PCOR fee is reported in Part II of that form, which also includes the amount of the fee (based on when in 2018 the plan year ended). For plan years ending on or after October 1, 2017 and before October 1, 2018, the fee is $2.39 per covered life. The fee for plan years ending on or after October1, 2018 through October 1, 2018 is $2.45 per covered life. Employers should work with their advisors and tax advisers in ensuring proper filing and payment of the fee.
IRS Information on PCOR fees »
IRS PCOR Questions and Answers »
Form 720 »
Form 720 Instructions »