PCORI Filing Fee Released for 2025-2026

The Patient-Centered Outcomes Research Institute (PCORI) fee established by the Affordable Care Act helps fund research to evaluate and compare health outcomes, clinical effectiveness, risks, and benefits of medical treatment and services. The fee, which is adjusted annually, is currently in place through 2029. In Internal Revenue Bulletin 2025-45, the IRS announced that the PCORI fee for plan years ending between October 1, 2025, and September 30, 2026, is $3.84. As has been the case in previous years, this new fee is an increase from the $3.47 payment for policy or plan years that ended between October 1, 2024, and September 30, 2025.

Employers and plan sponsors with self-funded plans are typically responsible for submitting IRS Form 720 and paying the PCORI fee by July 31 of the calendar year immediately following the last day of the plan year, meaning that payments for plan years that end in 2025 will be due in July of 2026. PCORI fees for self-funded plans are assessed on all covered lives, not just on employees. Plan sponsors can use one of three methods to calculate the average number of covered lives for the fee: the actual count method, the snapshot method, and the Form 5500 method.

Many fully insured employers do not need to take any action, as the insurer will submit the payment on their behalf. However, remember that fully insured employers with self-funded HRAs must pay the fee for each employee covered under the account.

Annual Gag Clause Attestation due by December 31, 2025

The annual Gag Clause Prohibition Compliance Attestation (GCPCA) required under a transparency provision in the Consolidated Appropriations Act, 2021 (CAA) must be submitted electronically to the Centers for Medicare & Medicaid Services (CMS) by December 31, 2025. Submission information — including FAQs, instructions, a user manual and an Excel spreadsheet for multiple reporting entities — can be accessed on the CMS website.

Group health plan sponsors and health insurance issuers must annually attest that their agreements with healthcare providers, third-party administrators (TPAs) or other service providers do not include a “gag clause.” To meet this requirement, health insurance issuers as well as fully insured and self-insured group health plans — including ERISA plans, non-federal governmental plans and church plans subject to the Internal Revenue Code — must submit an annual GCPCA, with the exception of the following:

• Plans or issuers offering only excepted benefits
• Issuers offering only short-term, limited-duration insurance
• Medicare and Medicaid plans
• State Children’s Health Insurance Program (CHIP) plans
• The TRICARE program
• The Indian Health Service program
• Basic Health Program plans

Note: It appears that this CAA transparency requirement, like others under the CAA, would not apply to retiree-only plans. For health reimbursement arrangements (HRAs) — including individual coverage HRAs — and other account-based plans, the Departments of Labor, Health and Human Services, and the Treasury are using discretion when it comes to enforcing this requirement until they can exempt these plans through the official rulemaking process.

Going forward

• Employer group health plan sponsors should work to determine which benefits must be included in the GCPCA in addition to their major medical plan (e.g., employee assistance program, retiree medical plan, ancillary benefits). The employer may also want to check with their major medical carrier to see if they will competing the attestation on their behalf or if the group is responsible for submitted directly to CMS for the 12/15/2024 – 12/14/2025 reporting period.
• Before submitting the annual GCPCA no later than December 31, 2025 (covering the period since the last preceding attestation), employer group health plan sponsors should review their vendor agreements to ensure they do not contain gag clauses.
• Self-insured group health plan sponsors may submit the GCPCA themselves or rely on their TPAs to submit it if a written agreement to do so is in place; however, the legal responsibility for submitting the GCPCA remains with the self-insured group health plan. Keep in mind that the information included in the GCPCA relates to the employer plan sponsor and its group health plan (e.g., name, employee identification number, plan name and number, contact information), and a TPA may not have access to all that information.
• Self-insured group health plan sponsors should consider submitting the GCPCA themselves, particularly in situations where the employer has additional carve-out benefits such as prescription drug or behavioral health and it is likely that the TPA will not have the information needed to attest to compliance for those benefits.
• Fully insured group health plan sponsors should be aware that since the GCPCA requirement applies to both the fully insured group health plan and the health insurance issuer, when the issuer of a fully insured group health plan submits a GCPCA on behalf of the plan, the compliance attestation submission requirement will be considered satisfied. In these cases, plan sponsors should confirm that the submission has been completed by the deadline with their carrier.

IRS Announces 2026 Health and Welfare Limits

Earlier this month, the IRS issued Rev. Proc. 2025-32, which announces the 2026 indexed limits for certain health and welfare benefits.  This is in addition to the limits the IRS announced in Rev. Proc. 2025-19 on May 1, 2025. 

Health and Welfare Limit Changes

	2025	2026
HSA Contributions	$4,300 for self-only coverage $8,550 for family coverage	$4,400 for self-only coverage $8,750 for family coverage
HSA-Compatible HDHP Deductible	$1,650 for self-only coverage $3,300 for family coverage	$1,700 for self-only coverage $3,400 for family coverage
HSA-Compatible HDHP Out-of-Pocket Maximum	$8,300 for self-only coverage $16,000 for family coverage	$8,500 for self-only coverage $17,000 for family coverage
Health FSA Salary Reductions	$3,300	$3,400
Health FSA Carryover	$660	$680

October 15th Deadline Nears for Medicare Part D Coverage Notices

Medicare Part D annual enrollment period, plan sponsors that offer prescription drug coverage must provide notices of creditable or noncreditable coverage to Medicare-eligible individuals.

The required notices may be provided in annual enrollment materials, separate mailings or electronically. Whether plan sponsors use the federal Centers for Medicare & Medicaid Services (CMS) model notices or other notices that meet prescribed standards, they must provide the required disclosures no later than Oct. 15, 2025.

Group health plan sponsors that provide prescription drug coverage to Medicare Part D-eligible individuals must also disclose annually to the CMS (within 60 days following their plan renewal) whether the coverage is creditable or noncreditable. The disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that do not offer prescription drug coverage to retirees.

Background

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors that provide prescription drug coverage to disclose annually to individuals eligible for Medicare Part D whether the plan’s coverage is “creditable” or “noncreditable.” Prescription drug coverage is creditable when it is at least actuarially equivalent to Medicare’s standard Part D coverage and noncreditable when it does not provide, on average, as much coverage as Medicare’s standard Part D plan.

Disclosure of whether their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period. Individuals who do not enroll in Medicare Part D during their initial enrollment period (IEP), and who subsequently go at least 63 consecutive days without creditable coverage (e.g., they dropped their creditable coverage or have non-creditable coverage) generally will pay higher premiums if they enroll in a Medicare drug plan at a later date.

Who Gets the Notices?

Notices must be provided to all Part D eligible individuals who are covered under, or eligible for, the employer’s prescription drug plan—regardless of whether the coverage is primary or secondary to Medicare Part D. “Part D eligible individuals” are generally age 65 and older or under age 65 and disabled, and include active employees and their dependents, COBRA participants and their dependents, and retirees and their dependents.

Because the notices advise plan participants whether their prescription drug coverage is creditable or noncreditable, no notice is required when prescription drug coverage is not offered.

Also, employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) are not required to provide the creditable coverage notice to individuals who are eligible for the EGWP.

Notice Requirements

The Medicare Part D annual enrollment period runs from Oct. 15 to Dec. 7. Each year, before the enrollment period begins (i.e., by Oct. 14), plan sponsors must notify Part D eligible individuals whether their prescription drug coverage is creditable or non-creditable. The Oct. 14 deadline applies to insured and self-funded plans, regardless of plan size, employer size or grandfathered status

Part D eligible individuals must be given notices of the creditable or non-creditable status of their prescription drug coverage:

• Before an individual’s IEP for Part D.
• Before the effective date of coverage for any Medicare-eligible individual who joins an employer plan.
• Whenever prescription drug coverage ends or creditable coverage status changes.
• Upon the individual’s request.

According to CMS, the requirement to provide the notice prior to an individual’s IEP will also be satisfied as long as the notice is provided to all plan participants each year before the beginning of the Medicare Part D annual enrollment period.

Model notices that can be used to satisfy creditable/non-creditable coverage disclosure requirements are available in both English and Spanish on the CMS website. Plan sponsors that choose not to use the model disclosure notices must provide notices that meet prescribed content standards.

Notices of creditable/non-creditable coverage may be included in annual enrollment materials, sent in separate mailings or delivered electronically. Plan sponsors may provide electronic notice to plan participants who have regular work-related computer access to the sponsor’s electronic information system. However, plan sponsors that use this disclosure method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.

Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor’s electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid email address and their prior consent. Before individuals can effectively consent, they must be informed of the right to receive a paper copy, how to withdraw consent, how to update address information, and any hardware/software requirements to access and save the disclosure. In addition to emailing the notice to the individual, the sponsor must also post the notice (if not personalized) on its website.

In Closing

Plan sponsors that offer prescription drug coverage will have to determine whether their drug plan’s coverage satisfies CMS’s creditable coverage standard and provide appropriate creditable/noncreditable coverage disclosures to Medicare-eligible individuals no later than Oct. 15, 2025.

Florida’s Minimum Wage Will Increase Again on Sept 30th

Florida’s minimum wage will rise yet again on September 30, jumping to $14/hour (and to $10.98 for tipped workers) as part of a series of scheduled increases approved by voters in 2020.

How We Got Here

In November 2020, Florida voters approved a constitutional amendment that gradually increases the state’s minimum wage to $15 per hour for most non-exempt employees by 2026. As a result, the state’s hourly minimum wage increased from $8.65 to $10 in 2021 and has been rising since by $1.00 each year on September 30 ($11 in 2022 and $12 in 2023). The next wage hike will soon take effect and continue rising through 2026, as shown in the schedule below:

• $14.00 on September 30, 2025
• $15.00 on September 30, 2026

Florida’s tipped employees also have received bumps in minimum wages each year since 2021. Just like non-tipped employees, the minimum wage for tipped workers will increase by $1.00 each year through 2026, as shown in the schedule below:

• $10.98 on September 30, 2025
• $11.98 on September 30, 2026

What Should You Do?

All Florida employers are required to comply with the new minimum wage requirement. If an employee is not paid at the required rate, they could be entitled to recover back wages plus damages and attorneys’ fees and costs under the state’s wage theft law and the Florida Minimum Wage Act. In addition, employers found liable for intentionally violating minimum wage requirements could be subject to a $1,000 fine per violation. Here’s what you should do to prepare for the new wage hike and stay compliant:

• Make sure that payroll is set up to capture the new minimum wage.
• Update the required minimum wage poster to reflect the new rate. As a reminder, all employers are required to post federal and Florida employment law posters where they can be easily seen by employees.
• Be aware of local wage theft ordinances. Several counties around the state have their own wage theft ordinances that provide for more relief than the state law. For example, if an employee files a wage theft claim in Miami-Dade County through the county’s Wage Theft Program, employers face paying three times the amount of wages owed to an employee.
• Check compliance with tip credits and tip pools. Employers that take a tip credit must ensure that tipped employees still receive at least the new minimum wage when tips are included. If your payroll system or tip pool does not properly account for the increase, you could inadvertently invalidate the tip credit and violate wage laws. Review your pay practices and any tip-sharing arrangements to confirm they remain compliant under the new rate.
• Look out for future wage hikes. While the increases to minimum wage under the current constitutional amendment end in 2026, we expect another amendment will make its way onto the ballot before then and potentially increase the minimum wage further. Employers must be mindful of these increases for both compliance and budgeting purposes.

New Lawsuit Highlights Concerns About AI Notetakers: 7 Steps Businesses Should Take

A new lawsuit just filed against Otter.ai underscores the legal and compliance risks companies face when using AI notetakers – and serves as a good reminder to deploy best practices to reduce your risks. The August 15th case alleges that Otter’s popular transcription tool secretly records conversations without proper consent and then uses that data to train its machine-learning models. While AI notetakers can boost productivity, they also raise privacy, security, and compliance questions. This Insight reviews the lawsuit, goes over key risks, and outlines seven practical steps businesses should take before relying on AI transcription tools.

Case Summary: Brewer v Otter.ai

The consumer filed a proposed class action in California federal court against Otter.ai, maker of the widely used Otter Notetaker. The complaint alleges the app unlawfully records conversations in popular video conferencing platforms without the consent of all participants.

Key allegations include:

• Unauthorized interception of conversations: The suit claims Otter records not only its account holder customers but also unsuspecting third parties involved in customer’s meetings, allegedly violating federal and California wiretap laws.
• Use of recordings to train AI models: According to the complaint, Otter allegedly retains conversational data indefinitely and leverages it to refine its speech recognition technology without participant permission.
• Shifting responsibility: The lawsuit asserts that Otter tells its customers to “make sure you have the necessary permissions” – effectively outsourcing compliance obligations to customers rather than obtaining proper consent itself.
• Violations of multiple laws: The complaint includes claims under the federal Electronic Communications Privacy Act (ECPA), Computer Fraud and Abuse Act (CFAA), the California Invasion of Privacy Act (CIPA), and other privacy statutes, as well as common law privacy torts and the state’s Unfair Competition Law.

Importantly, these are only allegations at early stages of the litigation. The complaint reflects the plaintiff’s version of events only. Otter has not yet filed its response to the lawsuit, the court has not made any findings of fact or law, and the company will have an opportunity to contest and defend these claims in court.

The Real Risks With AI Notetakers

Let’s be clear: we know you’re going to use a notetaker app – we’re not here to talk you out of it. And even if employers tell their employees not to use these tools, studies show employees are using them anyway. So cases like this highlight why employers need to proceed carefully. Common concerns include:

• Consent and Privacy Laws: Many jurisdictions require all parties to consent before recording conversations. You should review whether AI notetakers obtain consent from only the host or every participant.
• Data Ownership and Use: Unless you have an enterprise account or there are other contractual restrictions, review whether vendors retain recordings, transcripts, and even metadata indefinitely or use them to train AI models. Even when content is deleted, metadata about meetings often remains stored with the vendor. That means sensitive business information may influence how the model behaves, and in some cases could even be memorized and reproduced.
• Security Vulnerabilities:  Consider whether recordings stored in the cloud are secure and properly protected.
• Compliance with Workplace Laws: Do conversations include legally protected discussions (e.g., about health conditions, union activity, or complaints of harassment). Recording and storing this content may raise risks.
• Privilege and Confidentiality: Whether notetakers may inadvertently capture attorney-client discussions or other privileged communications, raising questions about whether privilege can be maintained.
• Reputational Exposure: Even if legally defensible, employees or clients may perceive silent recording as a breach of trust.

7 Steps Businesses Can Take

If your organization is using or considering AI notetaker tools, here are seven proactive steps to manage risk:

1. Update Consent Protocols

• Obtain consent from all participants, including external parties, before using a notetaker. Consider the need to obtain this consent each and every time you deploy a notetaker.
• This is true whether your meeting is with external participants or solely an internal meeting. Ensure employees understand that meetings may be recorded or transcribed through the same consent procedures (and include notice in your internal company policies as an extra layer of protection).

2. Carefully Vet Your Vendors 

• Ask direct questions about how data is stored, retained, and used for AI training.
• Seek contractual assurances that sensitive data won’t be repurposed.

3. Establish a Company Policy

• Provide policies that explain when and how AI notetakers may be used.
• Review employee responsibilities, including the notification to meeting participants, obtaining consent, and storage or deletion of recordings.

4. Limit Recording of Sensitive Conversations

• Review policies and protocols regarding AI notetaker use in meetings involving privileged, confidential, or sensitive HR topics.
• Consult with legal, compliance, or HR before deploying a notetaker in high-risk situations (like investigations, performance reviews, legal strategy discussions, and similar settings).

5. Review Security Safeguards

• Review vendors’ use of encryption and strong access controls.
• Consider auditing where data is stored geographically and whether it is subject to cross-border transfer.

6. Train Employees and Managers

• Discuss with staff when appropriate (and when not) to deploy AI notetakers.
• Provide scripts for informing clients or third parties that a notetaker is in use.

7. Develop a Governance Framework

• Incorporate AI notetaker use into your broader AI governance strategy.
• Align practices with EEOC, FTC, and NIST guidance on AI tools to stay ahead of evolving regulations.

Florida’s Mandatory E-Verify Law: A Compliance Plan for Covered Employers

Employers in Florida need to comply with the state’s stricter employment verification obligations, or they could face serious consequences. Since 2023, private businesses with at least 25 employees have been required to use the federal E-Verify system to confirm employment eligibility for new hires. Although the law garnered considerable media attention when it was first enacted, many employers may not know the state conducts compliance audits and imposes penalties for violations. Here’s how employers can be prepared and create a plan to mitigate legal and financial risks.

What is E-Verify?

• Work Authorization Verification: With few exceptions, all employers are required to complete a Form I-9 employment verification for new hires based in the US (and to reverify in certain circumstances). E-Verify is a free, web-based federal system that allows enrolled employers to confirm employment eligibility by electronically matching information provided on the Form I-9 against government records. While E-Verify is voluntary for most employers, it is mandatory for certain federal contractors and in some states.
• Federal-Level Fines: Regardless of whether an employer uses E-Verify, federal law imposes stiff penalties on employers that do not comply with I-9 employment verification obligations. Mistakes on I-9s can cost hundreds to thousands of dollars and knowingly hiring unauthorized workers can result in even higher penalties and possible jail time.  
• E-Verify Goals: The purpose of E-Verify is to help employers stay compliant with federal employment and immigration regulations, though there are pros and cons to using the electronic system when it’s voluntary. So, when E-Verify is not mandated, you should carefully review your I-9 compliance options.

What Does Florida Mandate?

• Covered Employers: Florida imposes strict immigration-related requirements on employers and workers, including a requirement that private employers with at least 25 employees use the E-Verify system to confirm employment eligibility for all new hires. Public employers in Florida also must comply, along with contractors and subcontractors working on public contracts, who were already subject to an E-Verify mandate prior to this law.
• State-Level Penalties: Employers face a $1,000 daily fine for repeat violations (three times in any 24-month period) until compliance is achieved. They could also see their business license suspended. Additionally, employers found to have knowingly hired unauthorized workers may face probationary oversight, mandatory quarterly reporting, and even permanent revocation of their business licenses. These penalties increase with the number of unauthorized employees and for repeat violations.

Florida’s Audit Process

You should note that certain state agencies have the authority to audit employers suspected of noncompliance, including Florida’s Department of Economic Opportunity (DEO) and Department of Law Enforcement (FDLE). The audit process generally includes:

• A notice of inspection indicating that the employer is under review.
• A request for documentation, such as E-Verify records, I-9 forms, and proof of annual certification.
• A 30-day window to correct any deficiencies after the employer has been notified of a violation.

Certain repeat violations can result in fines of up to $1,000 per day and the potential suspension or revocation of a state business license.

An Action Plan for Florida Employers

Covered Florida employers are required to take the following steps to stay compliant:

• Enroll in the E-Verify system and verify new hires within three business days of their start date.
• Retain proof of verification for at least three years.
• Certify on your first reemployment tax return each year that you have complied with the state’s E-Verify mandate.

You should also consider taking these additional steps to mitigate the risk of violations and state investigations:

• Conduct internal audits of I-9 and E-Verify records on a regular basis.
• Assign a specific staff member or HR lead to oversee E-Verify compliance and documentation.
• Maintain a clear process for onboarding new employees and completing the E-Verify submission within the required three-day window.
• Store all related documents securely and in an organized manner so they can be quickly retrieved if requested.
• Respond promptly to audit requests, be cooperative, and provide requested documentation within the specified timelines.
• Work with legal counsel as needed to resolve any issues.

 

2026 ACA Affordability Percentage Released

One of the hallmark provisions of the Affordable Care Act (ACA) requires Applicable Large Employers (ALEs), which are employers who averaged at least 50 full time or full time equivalent employees in the prior calendar year, to (1) offer minimum essential coverage (MEC) to at least 95% of their full-time employees and the dependent children of those employees and (2) ensure that minimum value (MV) coverage is affordable to their full-time employees at the lowest-cost, employee-only coverage level.

Employees who don’t receive an affordable offer of MV coverage may qualify for subsidized plans on the Exchange—triggering penalties for the employer. Importantly, ALEs are not required to offer affordable coverage to spouses or other dependents, though these individuals may also qualify for subsidies if their available employer-sponsored plan is unaffordable.

Under the ACA, a plan is considered affordable if the cost of the lowest-tier employee-only option falls under a set percentage of the employee’s household income. This baseline is adjusted annually by the IRS for inflation.

For 2026, the IRS has announced a new affordability percentage of 9.96%, up from 9.02% in 2025.

One Big Beautiful Bill Brings Changes for Employee Benefit Plans

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (“OBBB”) into law. The almost 900-page bill is a sweeping tax and spending package that President Trump regards as a fulfillment of campaign promises. In addition to tax and spending cuts, the OBBB includes several provisions that will impact employee benefit plans. Thankfully, the OBBB does not eliminate the tax exclusions for employer-provided health coverage.

Executive Summary

The OBBB’s changes for employee benefit plans include enhancements for Health Savings Accounts (HSAs), permanent extension of the telehealth relief for high-deductible health plans (HDHPs), and an increase in the annual contribution limit for dependent care FSAs. Most of the OBBB changes for employee benefit plans are effective in 2026 and do not require immediate employer action. The permanent telehealth relief extension for HDHPs is effective retroactively for the 2025 tax year so plan sponsors need to decide how to handle charges for telehealth benefits received prior to satisfaction of the deductible. The purpose of this alert is to provide an overview of these and other changes below and how they may impact your employee benefit plans but you will need to check with your insurance carrier on specifics on how they will handle some of these provisions.

Enhancements for Health Savings Accounts

There are two notable enhancements for HSAs:

• Permanent extension relief for first dollar telehealth benefits. The latest iteration of this previously temporary relief (which was a product of the COVID-19 pandemic) expired for plan years beginning in 2025. Under the OBBB, this relief is now permanent retroactively to plan years beginning after Dec. 31, 2024. This allows plans to provide low or no-cost telehealth benefits prior to satisfaction of the deductible for those enrolled in a qualified HDHP without jeopardizing employees’ HSA contributions.
• Direct primary care services. Under the OBBB, direct primary care service arrangements are not disqualifying coverage for HSA account holders and certain expenses are HSA-eligible expenses effective for months beginning after Dec. 31, 2025. Generally, direct primary care services include a monthly fee that covers office visits prior to the satisfaction of the HDHP deductible. These monthly fees are now HSA-qualified expenses, provided they do not exceed $150 per month for an individual or $300 per month for family (indexed for inflation annually).

The permanent extension of telehealth relief is a huge win for plan sponsors and employees. Since this relief is retroactive to plan years beginning after Dec. 31, 2024, plan sponsors who began charging HDHP participants fair market value (FMV) for telehealth services received prior to the satisfaction of the deductible can either keep their decision in place or pivot by reimbursing the FMV assessments already charged with either cash or HSA contributions. Plan sponsors who decided not to charge for telehealth in hopes of extended relief can rely on the retroactive effect of this relief and do not need to take action.

Increased Dependent Care FSA Limits

Effective for tax years beginning after Dec. 31, 2025 (i.e., January 2026 and beyond), the dependent care FSA limit is increased to $7,500 ($3,750 for married couples filing separately). This limit is not indexed for inflation.

While this increase is not as substantial as working parents would like, it is welcome news given that the prior limits have been in place since 1986 (save for a temporary increase during the COVID-19 pandemic). Plan sponsors will want to communicate these changes for 2026 open enrollment and ensure that their FSA vendor has updated plan documents/SPDs as well as the vendor’s systems to accommodate this increased limit.

Fringe Benefits

There are two notable changes:

• Effective for payments made after Dec. 31, 2025, the OBBB makes permanent the tax-free nature for certain employer payments of employee student loans under educational assistance programs. The overall educational assistance program exclusion (currently $5,250) is indexed for inflation.
• Creation of “Trump Accounts.” The OBBB creates new tax-favored accounts for children effective for tax years beginning after Dec. 31, 2025. Trump Accounts can be established for children under the age of 18 and include a $5,000 per year (indexed) contribution limit. Distributions are generally prohibited until the child turns 18. Employers can make up to $2,500 in nontaxable contributions. Additionally, there will be a pilot program under which the Treasury Department will pay a one-time credit of $1,000 to the Trump Account of U.S. citizen children born between 2025 and 2028. These accounts will operate similarly to IRAs with investments growing on a tax-deferred basis.

Next Steps

Most of the OBBB changes for employee benefit plans are effective in 2026 and therefore do not require immediate employer action.

Some action items for employers to consider include:

• For HDHP/HSA with 2025 plans years, decide whether to continue to charge FMV for telehealth services received prior to satisfaction of the deductible or pivot and reimburse telehealth FMV charges incurred for the 2025 plan year.
• Work with the FSA vendor to implement the increase in dependent care FSA limits for the 2026 tax year and communicate the increased limit to employees during 2026 open enrollment.
• Consider whether to make any employee benefit plan changes in 2026 to take advantage of OBBB changes regarding tax-free employer student loan payments under educational assistance programs and employer contributions to the Trump Accounts.

PCORI Filing Due by July 31st

Don’t Forget! An “old faithful” reporting requirement deadline is right around the corner: the Patient-Centered Outcomes Research Institute (PCORI) filing and fee. The Affordable Care Act imposes this annual per-enrollee fee on insurers and sponsors of self-funded medical plans to fund research into the comparative effectiveness of various medical treatment options.

The due date for the filing and payment of PCORI fee is July 31 for required policy and plan years that ended during the 2024 calendar year. For plan years that ended Jan. 1, 2024 – Sept. 30, 2024, the fee is $3.22 per covered life. For plan years that ended Oct. 1, 2024 – Dec. 31, 2024 (including calendar year plans that ended Dec. 31, 2024), the fee is calculated at $3.47 per covered life.

Insurers report on and pay the fee for fully insured group medical plans. For self-funded plans, the employer or plan sponsor submits the fee and accompanying paperwork to the IRS. Third-party reporting and payment of the fee (for example, by the self-insured plan sponsor’s third-party claim payor) is not permitted.

An employer that sponsors a self-insured health reimbursement arrangement (HRA) along with a fully insured medical plan must pay PCORI fees based on the number of employees (dependents are not included in this count) participating in the HRA, while the insurer pays the PCORI fee on the individuals (including dependents) covered under the insured plan. Where an employer maintains an HRA along with a self-funded medical plan and both have the same plan year, the employer pays a single PCORI fee based on the number of covered lives in the self-funded medical plan and the HRA is disregarded.

PCORI fee reporting and payment

The IRS collects the fee from the insurer or, in the case of self-funded plans, the plan sponsor in the same way many other excise taxes are collected. Although the PCORI fee is paid annually, it is reported (and paid) with the Form 720 filing for the second calendar quarter (the quarter ending June 30). Again, the filing and payment is due by July 31 of the year following the last day of the plan year to which the payment relates (i.e. filling for the 2024 PCORI fee is due by July 31, 2025)

Calculating the PCORI fee

IRS regulations provide three options for determining the average number of covered lives: actual count, snapshot and Form 5500 method. 

Actual count: The average daily number of covered lives during the plan year. The plan sponsor takes the sum of covered lives on each day of the plan year and divides the number by the days in the plan year.

Snapshot: The sum of the number of covered lives on a single day (or multiple days, at the plan sponsor’s election) within each quarter of the plan year, divided by the number of snapshot days for the year. Here, the sponsor may calculate the actual number of covered lives, or it may take the sum of (i) individuals with self-only coverage, and (ii) the number of enrollees with coverage other than self-only (employee-plus one, employee-plus family, etc.), and multiply by 2.35. Further, final rules allow the dates used in the second, third and fourth calendar quarters to fall within three days of the date used for the first quarter (in order to account for weekends and holidays). The 30th and 31st days of the month are both treated as the last day of the month when determining the corresponding snapshot day in a month that has fewer than 31 days.

Form 5500: If the plan offers family coverage, the sponsor simply reports and pays the fee on the sum of the participants as of the first and last days of the year (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.

The U.S. Department of Labor says the PCORI fee cannot be paid from ERISA plan assets, except in the case of 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.

Although the DOL’s position relates to ERISA plans, please note the PCORI fee applies to non-ERISA plans as well and to plans to which the ACA’s market reform rules don’t apply, like retiree-only plans.

How to file IRS Form 720

The filing and remittance process to the IRS is straightforward and unchanged from last year. On Page 2 of Form 720, under Part II, the employer designates the average number of covered lives under its “applicable self-insured plan.” As described above, the number of covered lives is multiplied by the applicable per-covered-life rate (depending on when in 2024 the plan year ended) to determine the total fee owed to the IRS.

The Payment Voucher (720-V) should indicate the tax period for the fee is “2nd Quarter.”

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 IRS.

Full instructions for Form 720 can be found here.

You missed a past PCORI payment. Now what?

An employer that overlooks reporting and payment of the PCORI fee by its due date should immediately, upon realizing the oversight, file Form 720 and pay the fee (or file a corrected Form 720 to report and pay the fee, if the employer timely filed the form for other reasons but neglected to report and pay the PCORI fee). Remember to use the Form 720 for the appropriate tax year to ensure that the appropriate fee per covered life is noted.

The IRS might levy interest and penalties for a late filing and payment, but it has the authority to waive penalties for good cause. The IRS’s penalties for failure to file or pay are described here.

The IRS has specifically audited employers for PCORI fee payment and filing obligations. Be sure, if you are filing with respect to a self-funded program, to retain documentation establishing how you determined the amount payable and how you calculated the participant count for the applicable plan year.