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The IRS recently released Notice 2022-59 to announce the inflation-adjusted amount group health plans must use to calculate the amount due to fund the Patient Centered Outcomes Research Institute (PCORI). Plans ending between October 1, 2022, and December 31, 2022, must use the adjusted amount to calculate the fee that will be due by July 31, 2023. The new per capita amount is $3.00 – increased from $2.79 for plans ending after September 30, 2021, and before October 1, 2022 – which plan sponsors and issuers will multiply by the average number of covered lives under the relevant plan to derive the total amount due.
Background
The Affordable Care Act (ACA) created PCORI, which is an independent, nonprofit research organization that seeks to empower patients and others with information, including comparative clinical effectiveness research, to help patients make better informed health care decisions. PCORI is funded through insurer and plan sponsor contributions to be reported and remitted annually on IRS Form 720. Plans and issuers began paying the PCORI fee for plan or policy years ending after September 30, 2012. Though originally scheduled to sunset for plan years ending after September 30, 2019, Congress extended the fee to plan or policy years ending before October 1, 2029.
Calculating PCORI Fees
Insurance carriers will calculate and pay the fees on behalf of fully insured plans, but carriers typically pass those fees through to the plan. Self-funded plans, including health reimbursement arrangements (HRAs), must calculate the fee. Self-funded plans may engage a third-party administrator to assist with PCORI fee calculation, but the plan sponsor ultimately bears the burden of filing IRS Form 720 and paying the applicable fee.
Plans may determine the number of covered lives by one of four acceptable methods:
- Actual Count Method – Count the covered lives on each day of the plan year and average the
- Snapshot Count Method – Determine the number of covered lives on the same day (plus or minus three days) of each quarter or month and average the result.
- Snapshot Factor Method – Determine the number of covered employees/retirees/COBRA participants on the same day (plus or minus three days) of each quarter or month who have self-only coverage and the number who have other than self-only Multiply the number of employees/retirees/COBRA participants with other than self-only coverage by 2.35 to approximate the number of covered dependents (rather than actually counting them) and add that to the number of employees/retirees/COBRA participants with self-only coverage. Average the result.
- Form 5500 Method – Determine the number of participants at the beginning and end of the plan year as reported on Form If dependents are covered, add the participant count for the start and the end of the plan year. If dependents are not covered, add the participant count for the start and the end of the plan year and average the result. Bear in mind a plan sponsor must file the applicable Form 5500 by July 31 to use this option.
Conclusion
Plan sponsors with plan years ending between October 1, 2022, and December 31, 2022 (including calendar year plans) should be aware of the higher amount they will need to use when reporting and paying the PCORI fee for the 2022 plan year. Plans that ended before October 1, 2022, will use the lower $2.79 per covered participant amount. Plan sponsors should ensure they take the necessary steps – including coordinating with carriers or TPAs – to calculate the fees, remit Form 720 with their payment, and, if using the Form 5500 Method, to complete and file Form 5500 by July 31.
This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
