IRS Revises Form 720 to Provide for Payment of PCORI Fee

The Internal Revenue Service has posted revised instructions for Tax Form 720 with important information for plan sponsors regarding how to submit the PCORI fee.

Form 720 is the form that must be used by employers and issuers to report their annual fee liability under new Internal Revenue Code (Code) Sections 4975 and 4976, as added by the Affordable Care Act (ACA), which generally require issuers and employers to pay a per capita fee to help fund the Patient-Centered Outcomes Research Institute (PCORI) Trust Fund. The fee is required to be reported annually on the second-quarter Form 720 and paid by its due date of July 31.

The ACA established PCORI to conduct research to evaluate and compare the clinical effectiveness, risks and benefits of medical treatments, services, procedures, drugs or other items or strategies that treat, manage, diagnose or prevent illness or injury. The fee is imposed on issuers of health insurance policies for each policy year ending on or after October 1, 2012, and before October 1, 2019, and plan sponsors of applicable self-insured health plans for each plan year ending on or after October 1, 2012, and before October 1, 2019. The fee is two dollars (one dollar in the case of policy years ending before October 1, 2013) multiplied by “the average number of lives covered under the policy.” For policy years ending on or after October 1, 2014, the fee is increased based on increases in the projected per capita amount of National Health Expenditures.