Compensation & Benefits Alert - July 2016

July 2016

Reminder to Self-Insured Plan Sponsors Deadline to Pay PCORI Fees is July 31st 

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July 31st is a major compliance deadline for sponsors of retirement and welfare benefit plans with a December 31 year end. In addition, July 31st is the deadline for employer sponsored group health care plans to fund the Patient-Centered Outcomes Research Institute (“PCORI”). Sponsors of self-insured health care plans including health reimbursement accounts must complete Form 720, Quarterly Excise Tax Return (“Form 720”) for the 2nd quarter and remit the applicable PCORI fee before July 31st.


One of the many provisions of the 2010 Patient Protection and Affordable Care Act (“PPACA”) was the creation of PCORI, a private, non-profit corporation to conduct research and to evaluate health outcomes, clinical effectiveness, risks, and benefits of medical treatments, etc. The PPACA requires that the Institute will be funded, in part, by a fee collected from health plan providers. For fully insured health plans, the PCORI fee is paid by the health insurance issuer. However, for self-insured health plans,1 including health reimbursement accounts, the PCORI fee is paid by the plan sponsor and it is due by July 31st each year and paid by filing a Form 720 with the IRS.

The Form 720 is designed to report and remit a variety of excise taxes. The PCORI fee is on page 2, Part II, item no. 133. If the plan sponsor has other excise taxes reportable for the second quarter of the year, the PCORI fee lines should be completed on the Form 720 in addition to any other reportable excise tax. This typically requires coordination between the human resources department and the tax department.

If the plan year of your group health care plan ended between January 1, 2015 and September 30, 2015, the PCORI fee is $2.08 per “covered person.” If the plan year ended between October 1, 2015 and December 31, 2015, the PCORI fee is $2.17 per “covered person.”

“Covered person” for this purpose includes employees, spouses, and dependents that are covered under the plan. The number of covered persons is determined after the end of the plan year under one of the following three methods, as provided in the regulations:
  1. Actual count method – Sum the actual number of covered persons on each day of the year and divide by 365 days;
  2. Snapshot method – Select a day or days from each calendar quarter and sum the actual number of covered persons on each of those days, then divide by the number of days selection as the snapshot; or
  3. The Form 5500 method – Use the participant counts on the 2015 Form 5500 to interpolate the number of covered persons.  If the plan offers coverage only for the employee (self-only coverage without any coverage offered to spouses or dependents), the average number of covered persons is determined by adding together the number of participants as of the beginning of the plan year reported on Line 5 of the Form 5500, plus the end of the year participant count reported on Line 6f of the Form 5500, divided by two. If the plan offers dependent coverage, the number of covered persons is determined by adding together the beginning of the year participant count (Line 5) and the end of the year participant count (Line 6f).
NOTE: Employers may use the Form 5500 method only if the Form 5500 is filed no later than July 31 of the year following the last day of the plan year. Therefore, plan sponsors who are subject to the PCORI fee and extend the Form 5500 beyond July 31st will need to determine the number of covered persons under the actual count method or the snapshot method.

For questions related to matters discussed above, please contact one of the following practice leaders:
Joan Vines
Senior Director, National Tax Office
Compensation and Benefits

Linda Baker
Senior Manager, 
Compensation and Benefits

Kim Flett
Sr. Director, National Tax
Compensation & Benefits

Don Hughes  
Compensation & Benefits

Penny Wagnon  
Senior Director,
Compensation & Benefits

The PCORI fee generally will apply to major medical benefits, while many other benefits such as dental plans, vision plans and health flexible spending arrangements are usually accepted.