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IRS Notice 2025-61 adjusts the Patient-Centered Outcomes Research Institute (PCORI) fee to $3.84 per covered individual for health plan years ending on or after October 1, 2025 and before October 1, 2026, including 2025 calendar plan years. This represents a 37-cent increase from last year’s $3.47 PCORI fee. The annual PCORI fee must be reported and paid to the IRS by July 31, 2026, via the second quarter Form 720 (Rev. June 2026).
Which Entity is Responsible for Paying the PCORI Fee?
The PCORI fee is imposed on health insurance issuers and self-insured health plan sponsors (employers).
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 is the PCORI Fee Calculated?
Plan Sponsors can use one of three alternative methods which are summarized by the IRS in its PCORI fee homepage and PCORI fee FAQs to determine the average number of covered lives:
Determining the Applicable PCORI Fee Amount Due July 31, 2026
The PCORI fee is due with the IRS Form 720 by July 31 of the calendar year following the end of the plan year. The PCORI fee due this July therefore applies to plan years that ended in 2025:
The applicable rate for a 2025 calendar plan year is $3.84 per covered life. The plan year is the ERISA plan year, as reflected in the wrap plan document/SPD and Form 5500 (if applicable). The PCORI fee also applies to short plan years.
Examples:
How to File the PCORI Fee Payment
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 should coordinate with their accounting team and tax preparers if they file other excise taxes on the Form 720.
Signature
The Form 720 can be signed by any person authorized by the employer 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 must 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 2nd Quarter. Alternatively, 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.
Electronic Filing of the 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 filing a paper Form 720 must have a wet signature but can still pay electronically through EFTPS.
Consult the IRS Instructions for Form 720 for additional directions on completing the form (see page 9).
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 2022 calendar year. For plan years that ended Jan. 1, 2022 – Sept. 30, 2022, the fee is $2.79 per covered life. For plan years that ended Oct. 1, 2022 – Dec. 31, 2022 (including calendar year plans that ended Dec. 31, 2022), the fee is calculated at $3.00 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.
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 2022 PCORI fee is due by July 31, 2023)
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.
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 2021 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.
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.