Executive Summary 
IRS Notice 2024-83 adjusts the Patient-Centered Outcomes Research Institute (PCORI) fee to $3.47 per covered individual for health plan years ending on or after October 1, 2024 and before October 1, 2025, which includes 2024 calendar plan years.  This represents a $0.25 per covered individual increase from last year’s PCORI fee (from $3.22).  

• Action Item: The annual PCORI fee must be reported and paid to the IRS by July 31, 2025, via the second quarter Form 720 (rev. June 2025).   

What Does PCORI Fee Fund? 
The fee is imposed on health insurance issuers and self-insured health plan sponsors to fund the Patient-Centered Outcomes Research Institute (PCORI).  The institute is an independent non-profit research organization that seeks to empower patients and others with actionable information about their health and healthcare choices.   

The institute maintains a robust portfolio of patient-centered outcomes research that addresses a variety of high priority conditions and topics, including projects targeting preventing maternal morbidity and mortality, improving outcomes for people with intellectual or developmental disabilities and addressing rare diseases.  The PCORI website lists current and completed research projects as well as outcomes.    

Who Needs to Pay the PCORI Fee? 

• Fully Insured Medical Plans: Health Insurers are responsible for paying the fee on fully insured health policies.  This fee is built into the insurance premium, so there is no action required by employers.  

• Self-Insured Medical Plans: The plan sponsor (the employer) is responsible for paying the PCORI fee for self-insured health plans.   Self-insured plans include “level funded” plans. 

  • For more details: Newfront Compliance Considerations for Self-Insured Plans Guide  

• Fully Insured Medical Plan with an HRA: The insurance carrier will pay the PCORI fee for the insured medical plan, and the employer will pay the PCORI fee based on the number of employees enrolled in the HRA.  This includes HRAs designed to cover cost-sharing under the major medical plan, specialty HRAs (HRAs designed to cover specific types of medical expenses such as infertility, abortion-related travel assistance, gender affirmation, mental health, and other specific medical expenses), spousal incentive HRAs (SIHRAs), as well as HRAs designed to reimburse individual policy premiums (ICHRAs and QSEHRAs).    

• Self-Insured Medical Plan with an HRA: As long as the self-insured (including level funded) medical plan and HRA have the same plan year, the employer will pay the PCORI fee only for the self-insured medical plan (not the HRA).  This special rule applies only for employees who are enrolled in the employer’s self-insured medical plan and also enrolled in an HRA.  The special rule does not apply where the employee is enrolled in another employer’s self-insured medical plan, such as with a SIHRA.  

  • Action Item: The employer must file the Form 720 and pay the fee for a self-insured or level funded medical plan or HRA.    

To Which Plans Does the PCORI Fee Apply? 
The PCORI fee generally applies only to major medical plans and health reimbursement arrangements (HRAs).    

The PCORI fee does not apply to dental and vision coverage that is an excepted benefit, whether through a stand-alone insurance policy or meeting the “not integral” test for self-insured coverage.   Virtually all dental and vision plans are excepted benefits.    

The PCORI fee also does not apply to health FSAs (which must be an excepted benefit to comply with the ACA) or HSAs, which are not group health plans.  

For a quick reference guide, the IRS has published a table which summarizes the applicability of the fee to common types of health and welfare benefits.  

How Does the PCORI Fee Apply to HRAs? 
HRAs are subject to the PCORI fee because they are self-insured health plans.  This includes HRAs designed to cover cost-sharing under the major medical plan, SIHRAs, ICHRAs, QSEHRAs, and specialty HRAs such as those designed to cover infertility, abortion-related travel assistance, gender affirmation, mental health, and other specific medical expenses.   

The PCORI rules provide an exception to the fee requirement for an HRA where the employee is also enrolled in the employer’s self-insured major medical plan (including level-funded plans) that has the same plan year as the HRA.  The exception provides that the employer is not required to pay the PCORI fee for the HRA because they are already paying the fee for the employee’s enrollment in the self-insured major medical plan (i.e., each person covered by both plans is counted only once for purposes of determining the PCORI fee).  

There is no exception from the PCORI fee for an HRA offered along with fully insured major medical coverage.  While the insurance carrier is responsible for paying the PCORI fee for the fully insured medical plan, the employer is responsible for paying the PCORI fee on the HRA.   The IRS is essentially double-dipping in this scenario by imposing the PCORI fee on the same lives covered by both the major medical and the HRA.  In recognition of this, the PCORI fee paid by the employer for the HRA is determined by a special rule that counts only one life per employee participating in the HRA (and not dependents).  

Employers offering a specialty HRA alongside both a fully insured medical plan and a self-insured (including level funded) medical plan will need to calculate the cost and pay the PCORI fee for the HRA only for those employees who are not enrolled in the employer’s self-insured (including level funded) medical plan.  For employees enrolled in the self-insured (including level funded) medical plan option and the HRA sharing the same plan year, the PCORI fee will be paid based only on the headcount (employees + dependents) in the self-insured medical plan.    

• Action Item: The PCORI fee is required for an HRA unless the employee is also enrolled in the employer’s self-insured major medical plan that has the same plan year as the HRA.  Where the PCORI fee is required, the employer is responsible for filing the 2^nd Quarter Form 720 and paying the PCORI fee for an HRA solely for the covered employees (not dependents). 

How is the PCORI Fee Calculated?
Plan sponsors of self-insured or level funded health plans (other than an HRA) calculate the fee based on the average number of total lives covered by the plan (employees, dependents & COBRA participants) multiplied by the applicable PCORI fee for the plan year.  Plan sponsors of an HRA (including specialty HRAs) alongside a fully insured plan will calculate the fee based only on the number of employees enrolled in the HRA.  Employers with multiple self-insured (including level funded) plans will calculate the average number of total lives for each plan and then add those average totals together in order to complete the form.   

Plan Sponsors can use one of three alternative methods which are summarized by the IRS in its PCORI fee homepage and PCORI fee FAQs: 

• Actual count method 

• Snapshot method 

• Form 5500 method 

How Much Do I Need to Pay on the July 2025 Form 720? 
The PCORI fee is due by July 31 of the calendar year following the plan year end date is as follows: 

• Plan Years Ending January 2024 – September 2024: $3.22 per covered life (including spouses/dependents) 

• Plan Years Ending October 2024 – December 2024:  $3.47 per covered life (including spouses/dependents) 

For calendar plan years, the applicable rate for the 2024 plan year filed by July 31, 2025 is $3.47 per covered life.  Employers filing for a self-insured medical plan should keep in mind that the plan year is the ERISA plan year reflected in the plan document, SPD, and Form 5500 (if applicable).  The PCORI fee also applies to short plan years, defined as any plan year less than 12 months.    

Examples: 

• Employer with a calendar plan year first changed to a self-insured medical plan (including level funded) effective January 1, 2024.  Employer must file the first Form 720 to pay the PCORI fee in July of 2025 based on the $3.47 PCORI rate. 

• Employer with a calendar plan year first changed to a self-insured medical plan (including level funded) effective January 1, 2025. Employer will file the first Form 720 to pay the PCORI fee in July of 2026. 

• Employer with a July 1 – June 30 plan year first changed to a self-insured medical plan (including level funded) effective July 1, 2024.  Employer will file the first Form 720 to pay the PCORI fee of $3.47 per covered life in July of 2026.   

• Employer with a self-insured medical plan (including level funded) has a short plan year from July 1, 2024 through December 31, 2024 to transition to a calendar plan year as of 2025. Employer must file the Form 720 in July 2025 to pay the PCORI fee for both the full plan year July 1, 2023 – June 30, 2024 ($3.22 per covered life) and the short plan year ending December 2024 ($3.47 per covered life).  The PCORI fee amount is prorated for the short plan year, as detailed in the IRS PCORI Fee FAQ.   

How do we file the PCORI fee? 
The PCORI fee is always filed on the second quarter IRS Form 720, regardless of the employer’s plan year.  The second quarter Form 720 is due by July 31.  Form 720 is used to pay the multiple forms of quarterly federal excise taxes.  Employers may want to coordinate with their accounting/tax departments if the company files any other applicable excise taxes.  Otherwise, much of the form is irrelevant to the PCORI filing.   

Instructions for Completing the PCORI-Related Portions of IRS Form 720  

Page 1: 

• The employer will complete their name and address and employer identification number at the top of the form.  

• Quarter ending will be June, and the year in which they are filing (2025).     

• Final return will be checked if the employer is going out of business, or no longer has a self-insured medical plan or HRA.   

• Address change will be checked if the employer has changed their address since the last filing.  

 Page 2: 

• Skip to Part II, (if no other taxes are being paid on this form) line 133 – Applicable self-insured health plans and choose the plan year ending.  Lines (a) and (b) under Specified health insurance policies are for insurance carriers.  Do not complete these lines.  Line (c) is for plan years ending before October 1 (non-calendar year plans) and line (d) is for plan years ending on or after October 1 (generally calendar year plans).   

• The number of lives will be entered on either line (c) or (d) under Applicable self-insured health plans using one of the methods outlined above.  An employer may enter the number of lives on both lines if they are filing for a full 12-month plan year and a short plan year.   

• The number of lives in lines (c) and or (d) is multiplied by the rate in column b and the result is entered in column (c) Fee 

• The total of lines (c) and (d) in the Fee column is brought over to the tax column 

• The same total in the tax column is brought down to line 2 Total. 

 Page 3: 

• Line 3:  The same total from Line 2 is brought forward to this line 

• Line 10:  The amount from line 3 is brought down to line 10 

• The form needs to be signed and dated and returned with payment.   

Signature 
The Form 720 can be signed by any person authorized by the company to sign these types of returns.  A wet signature is required unless the Form 720 is e-filed using one of the approved e-file providers.  

Methods of Payment 
Employers paying via check would complete the payment voucher 720-V at the end of the form with their EIN, amount paid, business name and address.  The tax period is 2^nd Quarter. Consult the IRS Instructions for Form 720 for additional direction on completing the form (see page 9).  

Alternately, employers can pay the PCORI fee through EFTPS.  This payment method is available for both e-filed and paper returns.  EFTPS payments should be applied to the second quarter.  To get more information about EFTPS go to EFTPS.gov  

Electronic Filing of Form 720 
Employers wishing to e-file the Form 720 must use one of the IRS approved e-file providers.  Forms that are e-filed can have an electronic signature.  Employers who file a paper Form 720 must have a wet signature but can still pay electronically through EFTPS.    

Reminder of Another July 31 Deadline: Form 5500 Filing 
One other deadline looming for calendar year health and welfare plans with 100 or more covered employees at the beginning of the plan year is the Form 5500 filing.  The Form 5500 filing is due to the DOL by the end of the 7^th month after the end of the health plan year, normally July 31^st.    

Plans are permitted to file a Form 5558 with the IRS for an automatic 2 ½-month extension of this deadline (to October 15, 2025 for calendar plan years).   

• For more details: Newfront Office Hours Webinar: ERISA for Employers 

Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship.  Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).