PCORI Fees Explained: Who Is Responsible for Paying?

If you have a level-funded health plan, self-funded health plan, or certain Health Reimbursement Arrangement (HRA) setups, there is an important compliance deadline approaching that should not be overlooked.

Every year, many employers discover too late that nobody submitted their required filing and payment of their PCORI fees, resulting in unnecessary stress and potential compliance issues.

The good news? The fee itself is usually modest and the calculation is simple. The challenge is knowing whether your organization is responsible and ensuring the filing and payment is completed on time.

What Are PCORI Fees?

PCORI fees are annual fees that help fund the Patient-Centered Outcomes Research Institute (PCORI), an organization created under the Affordable Care Act (ACA).

The institute conducts research to help patients, healthcare providers, and policymakers make informed healthcare decisions by comparing treatment effectiveness and health outcomes.

To support this research, certain health plans must pay an annual fee and report it using IRS Form 720, Quarterly Federal Excise Tax Return.

Although the fee amount is generally small, employers must still comply with the filing requirements.

Who Must Pay PCORI Fees?

Whether your company is responsible for PCORI fees depends on the type of health plan you offer.

Self-Funded Health Plans

Employers sponsoring self-funded group health plans are generally responsible for:

• Calculating the applicable fee

• Filing Form 720

• Paying the PCORI fee by the deadline

Level-Funded Health Plans

Many employers mistakenly assume level-funded plans are treated the same as fully insured plans.

In reality, level-funded arrangements are just another form of self-funded plans, which typically make the employer responsible for filing and paying PCORI fees.

Because level-funded plans vary by carrier and arrangement, employers should verify their responsibilities with their benefits advisor or third-party administrator (TPA).

Health Reimbursement Arrangements (HRAs)

Employers offering standalone HRAs or certain integrated HRA arrangements may also be required to pay PCORI fees.

Unlike traditional group health plans, HRAs generally count only participating employees when calculating covered lives.

Fully Insured Health Plans

In most cases, employers with fully insured group health plans are not responsible for filing Form 720 for PCORI fees.

Instead, the insurance carrier handles the reporting and payment requirements.

However, employers should still confirm whether any supplemental benefits or reimbursement arrangements create additional filing obligations.

What Is the PCORI Fee Deadline?

For plan years ending during 2025, the filing and payment deadline is generally July 31, 2026.

The fee is reported using IRS Form 720.

While the IRS may release updated versions of Form 720 closer to the deadline, employers should not wait until the last minute to determine who is responsible for filing.

The best time to address the issue is now.

How Are PCORI Fees Calculated?

The amount owed depends on the average number of covered lives under the applicable health plan during the plan year.

The IRS allows several methods for calculating average covered lives.

1. Actual Count Method

Employers count covered lives for every day of the plan year and calculate an average.

This method provides precise results but can require significant recordkeeping.

2. Snapshot Method (Recommended)

Employers select consistent quarterly snapshot dates and count covered lives on those dates

• Example; Add the covered life count (includes dependents) on January 1st, April 1st, July 1st and October 1st then divide by 4.

This approach is often simpler while still providing a reliable average.

3. Form 5500 Method (only when the 5500 has been filed by the PCORI filing deadline)

Employers may use participant counts reported on a timely filed Form 5500 when eligible.

This method can simplify calculations for plans already subject to Form 5500 reporting requirements.

Once the average number of covered lives is determined, employers multiply that number by the applicable annual PCORI rate published by the IRS.

Common PCORI Fee Mistakes Employers Make

Assuming Someone Else Is Handling It

One of the most common compliance mistakes is assuming that an insurance carrier, payroll company, CPA, TPA or benefits consultant is automatically filing Form 720. Remember, this fee is in fact a tax, filed once per year with your 3rd quarter tax filling, that means it is always your responsibility as an employer to ensure it is handled timely.

Responsibilities vary depending on the plan design and service agreements.

Missing the Filing Deadline

Even when the fee amount is relatively small, missing the filing deadline can create avoidable compliance headaches.

Misclassifying a Level-Funded Plan

Many employers mistakenly believe their level-funded plan is fully insured when it actually creates self-funded filing obligations.

Incorrect Covered Life Calculations

Using the wrong counting method or misunderstanding who should be included can lead to inaccurate fee calculations.

How Employers Can Prepare Now

Before July 31, employers should:

• Identify all health plan arrangements offered to employees

• Determine whether any plans are self-funded, level-funded, or HRA-based

• Confirm who is handling your quarterly Form 720 tax filing

• Gather enrollment and covered-life data

• Review compliance responsibilities with a qualified benefits advisor

Taking these steps early can help prevent last-minute confusion and missed deadlines.

The Most Important Question to Ask

The biggest issue with PCORI fees is often not the amount owed—it's discovering after the deadline that nobody included the calculator and payment when filing 3rd quarter Form 720.

Every employer with a level-funded plan, self-funded plan, or HRA arrangement should ask one simple question:

Who is filing our Form 720 and are they aware of our PCORI fee obligation?

If there is any uncertainty, now is the time to get clarification.

How DK Benefits Helps Employers Stay Compliant

Employee benefits compliance involves far more than PCORI fees alone. Employers face numerous filing requirements, notices, and reporting obligations throughout the year.

At DK Benefits, we help employers understand their responsibilities, identify potential compliance risks, and ensure important deadlines don't fall through the cracks.

Whether you offer a level-funded plan, self-funded plan, or fully insured coverage, having a clear compliance strategy can help protect your business and provide peace of mind.

Conclusion

PCORI fees are relatively small compared to many other employee benefits expenses, but they remain an important compliance requirement for certain employers.

If your company offers a level-funded health plan, self-funded health plan, or HRA, don't wait until the deadline to determine who is responsible for filing Form 720.

A quick conversation today can prevent a costly oversight tomorrow.