PCORI Fee for Employer Health Plans
A small annual fee per covered life funds federal patient-centered outcomes research. Insured plans pay it through the carrier. Self-funded plans pay it themselves, on Form 720, every July.
How the PCORI Fee Works
The IRS describes the fee in its PCORI questions and answers.
Who Pays
Issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans. If your plan is fully insured, the carrier pays. Insured plans may have the carrier pay the fee, but self-funded sponsors usually owe it directly. Confirm which applies to each plan and who is responsible, and keep that note with the compliance file.
The Current Rate
$3.84 per covered life for policy or plan years ending after September 30, 2025 and before October 1, 2026 (IRS Notice 2025-61). Earlier rates ran from $1.00 in the first years to $3.47 for years ending in 2024 to 2025. The IRS adjusts the rate annually, so confirm the rate for your plan year before you file.
How It Is Filed
Annually on Form 720, the quarterly federal excise tax return. Payment is due with the form, and no deposit is required. Many employers have not filed a quarterly excise return before, so it helps to ask a payroll provider or tax adviser how to complete it. Confirm the payment steps ahead of the deadline.
The Deadline
July 31 of the calendar year after the plan year ends. When paying through EFTPS, apply the payment to the second quarter. Because the form is quarterly but the fee is annual, mistakes in the payment period are common. Ask a tax adviser or payroll provider to confirm the correct quarter when the payment is made.
How It Is Calculated
The average number of lives covered during the plan year multiplied by that year’s rate. Employers should record the method used to count lives and the dates used, since the count drives the amount. A tax adviser or third-party administrator can help confirm the method that fits your plan.
When It Ends
The fee applies to plan years ending before October 1, 2029, under the extension enacted in December 2019. Employers should keep the end date in mind for long-term planning, but not assume anything about future law. Check current guidance each year, since extensions and rules can change.
Counting Covered Lives and Exceptions
Most mistakes come from counting the wrong people or paying when no fee is due.
Who Counts
Generally every covered individual counts, including dependents, COBRA enrollees and retirees. Include employees, spouses and dependents when counting, and keep records that show who was covered and when. If the count is complex, a tax adviser or administrator can help you apply the rules.
HRAs and Health FSAs
The IRS explains that a dependent is counted separately unless the sponsor maintains no applicable self-insured plan other than a self-insured HRA or health FSA. Employers with both a health reimbursement account and another self-funded plan should check how lives are counted, since the rules differ. A tax adviser can confirm the approach for your plans.
Excepted Benefits
Plans providing only excepted benefits, such as stand-alone dental or vision and most health FSAs, are not subject to the fee. Check each benefit separately, and keep the plan documents that show what the coverage includes. If a plan blends excepted benefits with other coverage, ask a tax adviser how the fee applies.
Wellness, EAP and Disease Management
These programs are excepted unless they provide significant medical care. Employers should look at what each program includes before assuming it is exempt. A program that provides meaningful medical treatment may be treated differently, so ask a tax adviser. Document the review and the conclusion so the reasoning is on file if the question is raised later.
Exempt Government Programs
Medicare, Medicaid, CHIP and certain military, veterans and tribal programs are exempt. Employers that cover people through these programs should check which plans are included in the count. A tax adviser can confirm how the rules apply, particularly where coverage overlaps.
Overseas Plans
Plans covering only employees who both work and reside outside the United States are not subject to the fee. Employers with international staff should review who is covered and where they live and work, since mixed groups may be treated differently. A tax adviser can help with the details.
Common Filing Points
A short list that keeps the filing clean.
Do Not Forget It Exists
The fee has no automatic notice. Put the July 31 date on the compliance calendar for every self-funded plan. Set a reminder for the filing month, and name the person who will complete the return. Because there is no notice, a missed date may go unnoticed until a later review.
Short Plan Years
The fee applies to a short plan year, using the same per-life rate for the year in which it ends. Plans with a short year should keep records showing the dates and the covered lives. Ask a tax adviser how to apply the rules to a short year, particularly after a plan change or a new contract.
Overpayments
An overpayment cannot be offset against the next year’s fee. Use Form 720-X to correct or claim it. If a payment is too high, correct it using the proper form rather than reducing next year’s payment. A tax adviser can walk you through the steps and how long the process takes.
Confirm Who Files For Insured Plans
Ask the carrier to confirm it is paying the fee on your insured plan so there is no gap. Do not assume the carrier is paying unless you have confirmation. Ask for a written response, keep it with the plan’s records and check again at renewal in case anything has changed.
Keep The Count Support
Retain the method and records used for the average lives count in case it is questioned. Keep the worksheets, dates and enrollment reports that show how the count was reached. Records like these are useful if the IRS asks for support or if the filing responsibility moves to a new person.
Coordinate With Your TPA
A third-party administrator may supply covered-life data, but the sponsor of a self-insured plan remains responsible for the filing. Even when a vendor provides data, the sponsor should review it and sign off on the numbers. Agree in advance on who provides what and by when, so the filing is not rushed.
Questions We Get About the PCORI Fee
Do fully insured employers pay the PCORI fee?
The issuer pays it for insured policies. The employer does not file Form 720 for a fully insured medical plan.
What is the due date?
July 31 of the year after the plan year ends, with the Form 720.
What is the current per-life rate?
$3.84 for plan years ending after September 30, 2025 and before October 1, 2026. The IRS adjusts the rate annually, so confirm the rate for your plan year before you file.
Do dependents count?
Generally yes. Every covered individual counts, including dependents, COBRA enrollees and retirees.
Is the fee deductible?
Ask your tax advisor. This guide covers the filing mechanics, not the tax treatment.
When does the fee end?
It applies to plan years ending before October 1, 2029.
Does an HRA owe the fee?
It can, depending on whether the sponsor maintains another applicable self-insured plan. The IRS explains the counting rule for integrated HRAs and health FSAs.
Where do I file?
On Form 720. Electronic filing is available but not required.
Related Guides
Related reading: Self-Funded Health Plans · Michigan Compliance Calendar · HSA, FSA and Section 125 Limits · RxDC Reporting Guide · MLR Rebates
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Laws and rules referenced
26 U.S.C. §§ 4375 to 4377 — The PCORI fee on fully insured and self-funded health plans.
This page is general information, not legal or tax advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
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