From the Hotline: Calculating PCORI Fee

Question: How do you calculate and submit the PCORI fee?

Answer: Self-insured health plans are responsible for paying an annual fee multiplied by the average number of covered lives, including dependents. The plan sponsor may choose either of three methods for determining the average number of lives (see below).

The following information regarding methods to determine the average number of lives covered is excerpted from the IRS website:

Applicable Self-Insured Health Plans

… 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:

  1. Actual Count Method: A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the play year and dividing that total by the total number of days in the plan year.
  2. Snapshot Method: A plan sponsor may determine the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second, or third month of each quarter, and dividing that total by the number of dates on which a count was made.
  3. Form 5500 Method: An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.

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 (PDF).

The annual fee for policy and plan years is $2 for policy and plan years ending after September 30, 2013 and before October 1, 2014. The annual fee is reported on IRS Form 720 which must be filed and corresponding fee paid 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. The fee may be paid electronically via the Electronic Federal Tax Payment System.