If your business reimburses employees for medical expenses through a 105-HRA, a QSEHRA, or an ICHRA, you have an easy-to-miss obligation each year: the PCORI fee. It is small, but forgetting it can mean penalties. Here is what you need to know before the July 31 deadline.
What the PCORI Fee Is
The PCORI fee helps fund the Patient-Centered Outcomes Research Institute, which studies the effectiveness of medical treatments. The fee applies to certain health coverage and self-insured arrangements — and the health reimbursement arrangements many small businesses use fall squarely into that category.
Which Arrangements Trigger It
You generally owe the PCORI fee if you sponsor a:
- 105-HRA — a Section 105 Health Reimbursement Arrangement
- QSEHRA — a Qualified Small Employer HRA
- ICHRA — an Individual Coverage HRA
These arrangements are treated as self-insured health plans for this purpose, which is what brings the fee into play.
How to Calculate It
The fee is based on the average number of covered lives during the plan year, multiplied by the per-life rate the IRS sets each year. There are a few accepted methods for counting covered lives; choosing the one that fits your records keeps the math clean and defensible.
Filing Form 720 — Due July 31
The PCORI fee is reported and paid on IRS Form 720, the Quarterly Federal Excise Tax Return. Even though Form 720 is normally a quarterly filing, for the PCORI fee you file it once a year, and the deadline is July 31 for the prior plan year. You only need to complete the PCORI portion.
Penalties for Missing It
Skipping the fee can lead to failure-to-file and failure-to-pay penalties plus interest. The fee itself is modest, so the penalties are rarely worth the risk of forgetting.
Make Next Year Easy
Keep a simple record of your covered-life counts by month and note the July 31 deadline on your calendar. With those two habits, the filing takes minutes.
Not sure if your HRA owes the PCORI fee — or how much? Manay CPA can calculate it and file Form 720 alongside your other filings. Book a benefits compliance check →
This article is for general informational purposes only and is not tax or legal advice. Consult a qualified tax professional about your specific plan.
