As COVID-19 has brought numerous changes to the world of health benefits, the Internal Revenue Service (IRS) published Notice 2020-44 to remind us that the PCORI fee is still due by July 31. The Notice announced the updated fee rate that applies to policy or plan years that end on or after October 1, 2019, and before October 1, 2020, as well as provided transition relief for calculating the number of covered lives during this timeframe
The Affordable Care Act (ACA) imposes a fee on employers who sponsor self-insured health plans and issuers of specified health insurance policies to help fund the Patient-Centered Outcomes Research Institute (PCORI). The PCORI fee went into effect for policy and plan years ending after September 30, 2012 and was set to expire for plan years ending before October 1, 2019. However, the Further Consolidated Appropriations Act, 2020, extended the fee for another 10 years (see our previous blog for a recap).
Now, the fee will continue to apply to policy or plan years ending before October 1, 2029.
The PCORI fee is reported once a year (by July 31) on the second quarter Form 720, and is paid using the Electronic Federal Tax Systems (EFTPS). Notice 2020-44 states for policy years and plan years ending on or after October 1, 2019, and before October 1, 2020, the applicable dollar amount to be multiplied by the average number of covered lives under the policy or the plan is $2.54 (up from the previous $2.45 amount).
The Notice recognizes that since plan sponsors and issuers believed the PCORI fee had expired, but prior to the announced extension months later, they may not have been accurately calculating the number of covered lives to be calculated for policy or plan years from October 1, 2019, through October 1, 2020. Therefore, the Notice states that the IRS will allow these sponsors and issuers to use a “reasonable” method to calculate the number of covered lives for this period, in addition to the existing counting methods.
The information and content contained in this blog post are for general informational purposes only, and does not, and is not intended to, constitute legal advice.