Each year, certain employers sponsoring self-insured health plans must calculate, report, and pay the PCORI fee to the Internal Revenue Service (IRS). For policy or plan years that ended in 2025, the next filing deadline is July 31, 2026.
What Is the PCORI Fee?
The PCORI fee was created by the Affordable Care Act (ACA) to help fund the Patient-Centered Outcomes Research Institute (PCORI), an independent organization that conducts research comparing the effectiveness of medical treatments, services, and healthcare approaches. The goal is to provide patients, healthcare providers, employers, and policymakers with better information to support healthcare decision-making.
Which Employers Must Pay the PCORI Fee?
The PCORI fee applies to sponsors of applicable self-insured health plans, level-funded arrangements, and health reimbursement arrangements (HRAs).
The employer (or plan sponsor) is responsible for calculating, reporting, and paying the fee absent an arrangement stating otherwise.
How Much Is the Fee?
The fee is calculated by multiplying the average number of covered lives by the applicable annual rate.
For plan years between Jan. 1, 2025, and Sept. 30, 2025, the fee is $3.47 per covered life.
For plan years between Oct. 1, 2025, and Dec. 31, 2025, the fee is $3.84 per covered life.
Employers of self-funded and level-funded plans must count all covered lives, including:
- Employees
- Spouses
- Dependents
- COBRA participants
- Retirees covered under the plan
Employers can generally use one of three methods:
- Actual count method: Count covered lives for each day of the plan year, then divide by the number of days in the year.
- Snapshot method: Count covered lives on one or more dates in each quarter, then average those counts. Count employees with self-only coverage as 1 and those with other-than-self-only coverage as 2.35.
- Form 5500 method: Use participant counts from Form 5500 for the beginning and end of the plan year, then average them.
Calculating the Fee for an HRA
For an HRA PCORI fee calculation, employers generally count only the employees or former employees covered by the HRA, not spouses or dependents.
If the employer also maintains another self-insured medical plan with the same plan year, the HRA may be folded into that plan’s counting method, so people covered under both are not counted twice.
How Is the Fee Reported and Paid?
The fee is reported using IRS Form 720, Quarterly Federal Excise Tax Return.
Although Form 720 is generally a quarterly filing, employers filing only for the PCORI fee submit the form once annually. The fee is reported on the second-quarter Form 720 and must be filed by July 31.
Employers generally pay the fee electronically through the IRS Electronic Federal Tax Payment System (EFTPS).
What Happens If an Employer Fails to File or Pay?
The IRS treats the PCORI fee as a federal excise tax. Employers that fail to file Form 720, underreport the fee, or make late payments may be subject to:
- Failure-to-file penalties
- Interest on unpaid amounts
- Additional IRS enforcement actions if noncompliance remains unresolved
The exact penalty amount depends on the circumstances, the length of the delay, and whether the IRS determines the failure was due to reasonable cause. As with other federal tax obligations, penalties and interest can accumulate over time. Employers should consult their tax advisors if a filing deadline has been missed.
Common Areas of Confusion
Many employers mistakenly assume level-funded arrangements are fully insured. For PCORI purposes, level-funded plans are generally treated as self-insured plans, meaning the employer is responsible for filing and paying the fee.
When an employer offers an HRA alongside a fully insured medical plan, the insurance carrier pays the fee for the insured medical plan, but the employer may still owe a separate PCORI fee for the HRA.
Most health flexible spending accounts (FSAs) are excepted benefits and are not subject to the fee.
Employer Action Items
- Determine whether your organization sponsors any self-insured health coverage, including level-funded plans, HRAs, ICHRAs, or QSEHRAs.
- Confirm who is responsible for filing. Employers are responsible unless another arrangement has been specifically established with a carrier, broker, third-party administrator, or payroll vendor.
- Calculate average covered lives using an IRS-approved methodology.
- Complete and file Form 720.
- Submit payment by July 31.
This information has been prepared by UBA. 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.
