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The IRS has issued a final rule that employers who offer various benefit plans must pay $1 per covered life per year to fund the Patient-Centered Outcomes Research Institute.

Navigating health reform

IRS Requires Benefit Plan Sponsors to Pay Annual Fee to Fund Research Institute

  • 3/20/2013

IRS Requires Benefit Plan Sponsors to Pay Annual Fee to Fund Research Institute

The IRS has issued a final rule that employers who offer various benefit plans must pay a fee to fund the Patient-Centered Outcomes Research Institute (PCORI), which was established by the Patient Protection and Affordable Care Act (PPACA).

This fee will be assessed on plan sponsors and issuers of individual and group policies for policy or plan years ending after Sept. 30, 2012. The first year of the fee is due July 31, 2013, and is equal to $1 per covered life per year.

The second year the fee adjusts to $2 per covered life and then it's indexed to national health expenditures thereafter until it ends in 2019. The fee will not apply to policy or plan years ending after Sept. 30, 2019. The final rule clarifies that the fee imposed on an employer sponsoring a self-insured health plan is based on the average number of lives covered under the plan during the plan year.

“Even though this fee may seem insignificant, this is one of many fees that will increase the cost to provide insurance to employees under the PPACA,” says Anita Baker, employee benefit plans managing partner at CliftonLarsonAllen.

Under the IRS final rule, issuers and plan sponsors are responsible for paying the fee, which is treated like an excise tax by the IRS. A federal excise tax return (Form 720) reporting liability for the fee must be filed by July 31 of the calendar year immediately following the last day of the plan year. The issuer of health insurance policies is responsible for filing Form 720 and paying the required PCORI fee. Plan sponsors that have self-insured plans must complete Form 720 and pay the fee directly to the IRS.

The assessed fees will support the PCORI’s research to evaluate and compare health outcomes and their clinical effectiveness.

Plans subject to the fee Plans exempt from the fee
  • Medical plans
  • Prescription drug plans
  • Self-insured dental or vision plans, if provided without a separate election or premium charge
  • Health reimbursement arrangements (HRAs)
  • Retiree-only health plans (even though some are exempt from other PPACA mandates)
  • Separately insured dental or vision plans
  • Self-insured dental or vision plans, if subject to separate
    coverage elections and employee contributions
  • Expatriate coverage provided primarily for employees who work
    and reside outside of the United States
  • Health savings accounts (HSAs)
  • Most flexible spending accounts (FSAs)
  • Employee assistance programs (EAPs), wellness programs,
    and disease management programs that do not provide "significant benefits in the nature of medical care or treatment"

How we can help

Contact your employee benefit plan professional with questions about this requirement, filing the appropriate paperwork, and paying the fee.


Anita Baker, Employee Benefit Plans Managing Partner
anita.baker@cliftonlarsonallen.com or 602-604-3563