The Affordable Care Act (ACA) created a nonprofit corporation, the Patient-Centered Outcomes Research Institute (PCORI) to support clinical effectiveness research for healthcare. The institute is funded in part by fees paid by health insurers and sponsors of self-funded health plans (PCORI fees), which are reported and paid annually in the second quarter using Form 720.
The latest updated fee amount for plan years ending in October 2025 – September 2026 is $3.84 per covered life as set forth in IRS Notice 2025-61 - Internal Revenue Bulletin: 2025-45 | Internal Revenue Service.
Plans Subject to the Fee
The PCORI fee applies to most group health plans, but not to excepted benefits. Health reimbursement arrangements (HRAs) and retiree-only plans are subject to the PCORI fee, but most health flexible spending arrangements (FSAs) qualify as excepted benefits and are not subject to the fee. The IRS published a chart that describes the different types of plans subject to the fee here.
The Consolidated Appropriations Act, 2020 extended the PCORI fees another 10 years to 2029.
For fully-insured plans, the health insurance carriers report and pay the fee (the employer should not have to do anything). For self-funded group health plans, including HRAs and retiree-only plans, employers are responsible for reporting and paying the fee. NOTE: Qualified small employer HRAs (QSEHRAs) and individual coverage HRAs (ICHRAs) are subject to the PCORI fee.
Reporting the Fee
The fee is paid using quarterly excise tax Form 720, Line 133 (133(c) and (d) for self-funded plans) and must be paid no later than July 31st of the year following the last day of the plan year; for example, the PCORI fee is due by July 31, 2026 for any plan years ending during 2025. The fee must always be reported in the 2nd quarter (for the quarter ending June 30), regardless of the employer’s plan year. For employers that do not otherwise file quarterly excise taxes, the Form 720 might only be filed for the 2nd quarter each year to report the PCORI fee.
Payment amounts are increased annually and differ based on the ending date of the employer’s plan year. The fees for plan years ending in 2025 are below:
For Plan Years Ending In | Applicable PCORI Fee
January – September 2025 | $3.47
October – December 2025 | $3.84
Calculating the Average Covered Lives
Self-funded plans may use one of three methods to determine the average covered lives used for reporting and paying the PCORI fee. Plan sponsors must stick with one method for the entire plan year but can change methods from year to year. COBRA participants and retirees should be counted, regardless of which method below is chosen.
There are two special rules that apply for counting covered lives when an employer offers multiple self-funded plans or offers an HRA integrated with a fully-insured group medical plan.
1. Multiple Self-Funded Plans
If one plan sponsor maintains more than one self-funded health plan with the same plan year, the arrangements can be treated as a single plan for purposes of the fee (i.e., each unique covered life is only counted once). For example, if the employer offers a self-funded group medical plan and an integrated HRA, the employer could base the fee off the covered lives for the group medical plan and disregard the HRA (because the same individuals are covered under both plans).
2. HRAs (and health FSAs not meeting excepted benefit status)
An employer who sponsors an HRA integrated with a fully-insured medical plan is required to pay the fee only with respect to each HRA participant/employee; the employer is not required to count dependents or beneficiaries.
Failure to Pay the Fee
For a failure to file, it is generally advisable to file a Form 720 for the applicable year (or Form 720X for an amendment) as soon as possible for any missed fees and then to pay any associated fines or penalties the IRS may assess. A separate Form 720 should be filed for each missed plan year rather than paying fees for multiple plan years on the same Form 720.
Since this PCORI fee is considered an excise tax, Code §6651 sets forth the following penalties for failure to file a return or pay a tax.
1. For failure to file the Form 720, the penalty is 5% of the excise tax due for each month or part of a month the return is late, with a cap of 25% of the unpaid tax.
2. For failure to pay the PCORI fee, the penalty is .5% of any tax not paid by the due date for each month or part of a month the tax remains unpaid, up to 25% of the unpaid tax.
On top of the penalties, interest can be charged on unpaid excise taxes. On the other hand, in some cases, penalties may be waived if the plan sponsor has reasonable cause and the failure to pay was not due to willful neglect.
Please contact your service team with any questions.
Unison Risk Advisors Compliance Team | benefitscompliance@unisonriskadvisors.com
Disclaimer: Materials are solely for informational purposes as an educational resource. Please contact counsel to obtain advice with respect to any specific issue.
