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The Affordable Care Act (ACA) established the Patient-Centered Outcomes Research Institute (PCORI) to explore the effectiveness of medical treatments. An associated fee is charged to health insurers/health plans to finance a portion of a trust fund in support of this non-profit institute. The PCORI fee is paid by health plan issuers for fully insured plans, and employers/plan sponsors for self-funded plans. Excepted benefit plans, such as most Health Flexible Spending Accounts (FSAs), are not subject to the PCORI fee.
 
For PCORI-filing entities, the Quarterly Federal Excise Tax Return, Form 720, used to report PCORI information to the Internal Revenue Service (IRS) must be filed by 7/31/2023. Although Form 720 is a quarterly return, it is filed annually for PCORI fee purposes, by July 31 of the year following the last day of the policy/plan year.
 
For policy/plan years that ended on/after October 1, 2022, and before October 1, 2023, the PCORI fee is $3.00 per person. The fee is multiplied by the average number of lives covered under the policy/plan.
 
For policy/plan years that ended on/after October 1, 2021, and before October 1, 2022, the PCORI fee is $2.79 per person. The fee is multiplied by the average number of lives covered under the policy/plan. 
 
The PCORI fee is paid through the IRS’s Electronic Federal Tax Payment System (EFTPS).
 
Who Files?
For fully insured plans, the PCORI fee is paid by the health insurer, not the employer. Therefore, the employer does not have to take action or file Form 720.
 
For self-insured plans, the employer/plan sponsor pays this fee. Therefore, IRS guidance states the PCORI fee is tax deductible for the employer/plan sponsor of self-insured plans as an ordinary and necessary business expense.
 
For detailed information on the PCORI fee, please review the IRS Patient-Centered Outcomes Research Trust Fund Questions and Answers.
 
For information on the types of insurance coverage or arrangements subject to the PCORI fee, please review Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements.
 
In most cases, your employer clients will not be responsible for reporting or paying the PCORI fee. An employer is responsible for the fee if it sponsors self-insured coverage or a Health FSA that is not treated as an “excepted” benefit.
 
Excepted Benefit FSAs
An excepted-benefit Health FSA is not required to remit PCORI fees. Most FSAs meet this definition. To be considered an excepted-benefit FSA:

1. FSA-eligible participants must also be eligible for a separate non-excepted benefit group plan, such as an ACA-compliant group medical plan.
2. If the employer contributes a flat contribution to the FSA, it must not exceed $500. Or the employer can make a dollar-for-dollar match on the employee’s contribution in excess of the $500 flat dollar contribution.

 
Again, almost all compliant Health FSAs meet the “excepted benefit” definition.
 
If an employer offers a Health FSA and is not certain if its plan is an excepted benefit, the employer should contact its FSA administrator to confirm. Excepted-benefit status (or non-status) should be included in the employer’s self-established ERISA documentation, which is usually made in consultation with an ERISA attorney.