In Notice 2020-44, the IRS announced that the Patient-Centered Outcomes Research Institute (PCORI) fee for plan years that end on or after October 1, 2019 and before October 1, 2020, is based on the applicable dollar amount of $2.54.

The PCORI fee was mandated by the Affordable Care Act to help fund research on the comparative effectiveness of medical treatments. The fees must be paid by July 31 following the last day of the plan year.

The PCORI fee was supposed to sunset on September 30, 2019. In December 2019, the Further Consolidated Appropriations Act, 2020 extended the PCORI fee for 10 years, so it continues to apply to all plan years that end on or before September 30, 2029.

Calculating PCORI fees

Under the Affordable Care Act, issuers of specified health insurance policies (under IRC Section 4375) and plan sponsors of self-insured health plans (under IRC Section 4376) must pay PCORI fees calculated by using the average number of lives covered under the policy or plan multiplied by the applicable dollar amount for that policy year or plan year.

Notice 2020-44 updated the dollar amount to $2.54 for calculating the fee for plan years ending between October 2019 and October 2020. For policy years and plan years that end on or after October 1, 2018, and before October 1, 2019, the adjusted applicable dollar amount is $2.45.

Notice 2020-44 also gave transition relief for policy issuers and plan sponsors that had not anticipated calculating the number of covered lives because they thought the PCORI fee would no longer be collected. For policy years ending on or after October 1, 2019, and before October 1, 2020, the Notice permits issuers and sponsors to use any reasonable method for calculating the average number of covered lives so long as they apply that method throughout the year.

Implications

An employer that has a calendar year health plan (with the plan year ending on December 31 each year) may have thought that it had paid its last PCORI fee in 2019 but will now be required to pay that fee with IRS Form 720 again by July 31, 2020.

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