For self‐funded plans, the self‐insured employer is responsible for submitting the fee and accompanying paperwork to the IRS. Third‐party reporting and payment of the fee is not permitted for self‐funded plans.
Employers subject to the fee must submit it by July 31 of the year following the last day of the plan year. For the coming year, self‐insured health plan sponsors should use Form 720 for the second calendar quarter (and related instructions) to report and pay the PCORI fee by July 31, 2018.
On page two of Form 720, under Part II, the employer needs to designate the average number of covered lives under its applicable self‐insured plan. The number of covered lives is multiplied by $2.39 for plan years ending on or after October 1, 2017, to determine the total fee owed to the IRS next July.
Although the fee is paid annually, employers should indicate on the Payment Voucher (720‐V)—located at the end of Form 720—that the tax period for the fee is the second quarter of the year. Failure to properly designate '2nd Quarter' on the voucher will result in the IRS's software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with the IRS.
Methods To Calculate Average Number of Lives Covered
Actual count method – The total number of lives covered (employees and their covered family members or only employees if HRA or FSA) on each day of the plan year, divided by the total number of days in the plan year.
Snapshot method – At least one date during each month of each quarter. Dates in each quarter must be within 3 days of the dates for corresponding quarters.
Snapshot actual method – Total number of lives covered (employees and their covered family members or only employees if HRA or FSA) on each selected date, divided by the number of dates used.
Snapshot factor method – Number of participants with self‐only coverage plus 2.35 times the number of participants with other than self‐only coverage. (Do not use this method for HRA or FSA plans.)
Form 5500 method – Use participant counts from the 5500 for that plan for that year.
Plan with only self‐only coverage – Add the total number of participants at the beginning and end of the plan year and divide by 2 to get the average for the year.
Plan with self‐only and dependent coverage – Add the total number of participants at the beginning and end of the plan year. (Do not use this method for HRA or FSA plans.)
Information contained in this Associate Release is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. AJM Associates, Inc. provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, individual insurance, Medicare, and ancillary coverage services. For additional information about our services, please contact us at www.ajmassoc.com