Reminder: PCORI filing due July 31

The Patient-Centered Outreach Research Institute (PCORI) fee is a temporary charge on both fully insured and self-funded healthcare plans, applicable for policy years from 2012 to 2029. This fee funds the Patient-Centered Outcomes Research Institute, which supports comparative clinical effectiveness research to improve healthcare decision-making.

The filing and payment to the IRS is due by July 31, 2026, and applies to policy and plan years ending during the 2025 calendar year. The applicable PCORI fee is based on the plan year-end date:

• $3.84 per covered life for plan years ending on or after Oct. 1, 2025 and before Oct. 1, 2026

• $3.47 per covered life for plan years ending before Oct. 1, 2025

For a detailed breakdown of filing deadlines and applicable rates by plan year, refer to the IRS chart:

• View PCORI filing due dates and applicable rates (opens a new window)

Insurers report and pay the fee for fully insured group medical plans. Sponsors of self-insured health plans must file IRS Form 720 and pay the fee directly.

The PCORI fee is reported in Part II, Line 33 of IRS Form 720. Although Form 720 is a quarterly return, the PCORI fee is filed annually marking the 2^nd quarter on the payment voucher.

• View Form 720 (Rev. June 2026) (opens a new window)

Calculating the PCORI fee

The PCORI fee is calculated by multiplying the applicable per-covered-life rate by the average number of covered lives during the plan year.

IRS regulations provide three methods for determining the average number of covered lives:

• Actual count method

• Snapshot method

• Form 5500 method

Covered lives generally include spouses, covered children, retirees, and COBRA participants. Lockton account service teams can help you determine which of these methods is most appropriate on a client-by-client basis.

Actual count method: Determined by adding the totals of lives covered for each day of the month and dividing by the number of the days of the benefit year.

Snapshot method: Determined by adding the totals of lives covered on a date during each quarter of the plan year (or more dates in each quarter if an equal number of dates is used in each quarter) and dividing by the number of the dates on which a count was made. Each date used for the second, third, and fourth quarter must be within three days of the date that corresponds to the date used for the first quarter, and all dates must fall within the same plan year. The number of lives covered on a designated date is equal to the sum of the number of participants with self-only coverage on that date; plus the number of participants with coverage other than self-only coverage on that date multiplied by 2.35.

Form 5500 method: Determined by the sum of the participants as of the first and last days of the year without dividing by two if the plan offers family coverage (recall that dependents are not reflected in the participant count on the Form 5500). There is no averaging. In short, the sponsor is multiplying its participant count by two to roughly account for covered dependents.

Lockton comment: To use the Form 5500 method, the plan sponsor must have filed the Form 5500 by the due date for the PCORI fee for that year. If the plan sponsor files an extension, it may not be able to use this method.

An employer must use the same method during a plan year but is allowed to change to a different method for a subsequent plan year.

The U.S. Department of Labor (DOL) says the PCORI fee cannot be paid from ERISA plan assets, except for union-affiliated multiemployer plans. In other words, the PCORI fee must be paid by the plan sponsor; it cannot be paid in whole or part by participant contributions or from a trust holding ERISA plan assets. The PCORI expense should not be included in the plan’s cost when computing the plan’s COBRA premium. The IRS has indicated the fee is, however, a tax-deductible business expense for sponsors of self-funded plans.

Lockton comment: Although the DOL’s position relates to ERISA plans, please note the PCORI fee applies to non-ERISA plans as well. It also applies to plans to which the Affordable Care Act’s market reform rules don’t apply, like retiree-only plans.

Special rules for HRAs (including QSEHRAs and ICHRAs)

Health reimbursement arrangements (HRAs) are treated as self-insured health plans and are therefore subject to the PCORI fee.

This includes:

• Traditional HRAs

• Qualified Small Employer HRAs (QSEHRAs)

• Individual Coverage HRAs (ICHRAs)

For employers sponsoring both an HRA and a medical plan:

Fully insured medical plan + HRA (including QSEHRA or ICHRA):

• The insurer pays the PCORI fee for the insured medical plan

• The employer pays the PCORI fee for the HRA based on the number of participating employees (not dependents)

Self-insured medical plan + HRA (same plan year):

• The employer pays one PCORI fee based on the self-insured medical plan only (HRA is disregarded)

Self-insured medical plan + HRA (different plan years):

• Potential duplication fees may apply unless the employer aligns plan years or consolidates arrangements

Because ICHRAs and QSHRAs are employer-funded reimbursement arrangements, the employer is responsible for filing Form 720 and paying the PCORI fee annually.

How to file IRS Form 720

The filing process remains unchanged:

• Report the PCORI fee on Page 2, Part II, Line 33 of Form 720

• Multiply covered lives by the applicable rate to determine the total fee

• Submit payment with Form 720-V, indicating the tax period as “2^nd Quarter”

Lockton comment: Failure to properly designate “2nd Quarter” on the voucher will result in the IRS’ software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with the IRS.

Missed a PCORI filing?

Employers that fail to timely file or pay should:

File Form 720 as soon as possible (or file a corrected Form 720 (opens a new window) if necessary)

The IRS may impose interest and penalties for late filing, although relief may be available for reasonable cause. The IRS’s penalties for failure to file or pay are described here (opens a new window). (opens a new window)

Lockton comment: We have seen the IRS specifically audit employers for PCORI fee payment and filing obligations. If you are filing with respect to a self-funded program, be sure to retain documentation establishing how you determined the amount payable and how you calculated the participant count for the applicable plan year.

PCORI filing for short plan years

A short plan year spans less than 12 months and typically occurs when either a new calendar year self-insured health plan is established after Jan. 1, or when a non-calendar year self-insured plan changes its plan year to a calendar year. In both situations, the PCORI fee applies to the short plan year. Just as with calendar year plans, the fee due for a short plan year is based on the average number of covered lives.

Unfortunately, the fee is not prorated for the short plan year; therefore, if the number of covered lives is the same, it can be interpreted as if paying double for a year when the plan is transitioning from a non-calendar year to a calendar year. Also, because the fee is not prorated, new self-insured plans that start after Jan. 1 will pay the PCORI fee based on the average number of covered lives. A plan changing from fully insured to self-funded midyear will have PCORI obligation despite the insurance carrier paying the fee for the fully insured plan. The same “double taxation” will hold true if a plan changes from one fiscal year to a different fiscal plan year.

For more alerts, insights and additional information, click here (opens a new window) to visit Lockton's ERISA Compliance Consulting page.

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