Get access to the exclusive HR Resources you need to succeed in 2018!
SHRM board member David Windley discusses how unconscious bias can derail workplace diversity efforts.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Employers with self-insured health plans must pay the annual fee by each July 31 through 2019
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
For 2018, the annual fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI), paid by employers that sponsor self-insured health plans and by commercial group health insurance providers, will go up by about 10 cents per employee or dependent enrolled in the health plan, the IRS announced in October.
The fees are due by July 31. The chart below shows the fees to be paid in 2018, which rose slightly from the fees owed in 2017.
Notice 2017-61, the IRS set the amount used to calculate the PCORI fee payable for plan years that end on or after Oct. 1, 2017, and before Oct. 1, 2018, including 2017 calendar year plans.
"Plan sponsors must pay the PCORI fee by July 31 of the calendar year immediately following the calendar year in which the plan year ends," explained Richard Stover, a New York City-based principal at Conduent, an HR consultancy and service provider. "All plan sponsors of self-insured group health plans will pay the PCORI fee in 2018, but the amount of the fee paid will vary depending on when the plan year ends."
The PCORI fee was first assessed for plan years ending after Sept. 30, 2012, Stover pointed out. The fee for the first plan year was $1 per plan enrollee, increasing to $2 per enrollee in the second year, and then indexed in subsequent years based on the increase in national health expenditures.
"The PCORI fee will not be assessed for plan years ending after Sept. 30, 2019, which means that for a calendar-year plan, the last year for assessment is the 2018 calendar year," Stover said.
[SHRM members-only toolkit: Complying with and Leveraging the Affordable Care Act]
Paying PCORI Fees
For self-funded plans, the self-insured employer is responsible for submitting the fee and accompanying paperwork to the IRS. "Third-party reporting and payment of the fee is not permitted for self-funded plans," said Mark Holloway, senior vice president and director of compliance services at Lockton Companies, a benefits services firm based in Kansas City, Mo.
Employers subject to the fee must submit it by July 31 of the year following the last day of the plan year. For the coming year, self-insured health plan sponsors should use
Form 720 for the second calendar quarter (and
related instructions) to report and pay the PCORI fee by July 31, 2018.
"On page two of Form 720, under Part II, the employer needs to designate the average number of covered lives under its applicable self-insured plan," Holloway explained. The number of covered lives is multiplied by $2.39 for plan years ending on or after Oct. 1, 2017, to determine the total fee owed to the IRS next July.
Although the fee is paid annually, employers should indicate on the Payment Voucher (720-V)—located at the end of Form 720—that the tax period for the fee is the second quarter of the year. "Failure to properly designate '2nd Quarter' on the voucher will result in the IRS's software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with the IRS," Holloway warned.
A few other points to keep in mind: "The U.S. Department of Labor believes the fee cannot be paid from plan assets," he said. For self-insured health plans, in other words, "the PCORI fee must be paid by the plan sponsor—it is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions."
In addition, PCORI fees "should not be included in the plan's cost when computing the plan's COBRA premium," Holloway noted. But "the IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans," he said, citing
a May 2013 IRS memorandum.
A 2017 compliance alert from EPIC insurance brokers and consultants provides tips on how to count the number of plan participants when calculating PCORI fees.
Related SHRM Article:
PCORI & Reinsurance Fees—Keeping Them Straight,
SHRM Online Benefits, June 2013
Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. Join/Renew Now and let SHRM help you work smarter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
SHRM Member Discounts Program
SHRM’s HR Vendor Directory contains over 3,200 companies