The IRS has issued Notice 2020-84, found at irs.gov/pub/irs-drop/n-20-84.pdf, which sets forth the applicable dollar amount for the Patient-Centered Outcomes Research Institute (PCORI) for policy years and plan years ending on or after October 1, 2020 and before October 1, 2021.

PCORI Fee Amount: The PCORI fee is imposed by Sections 4375 and 4376 of the Internal Revenue Code, which were added by the Affordable Care Act and extended to 2029 by the Further Consolidated Appropriations Act, 2020. Plans must report and pay their 2020 fee on Form 720 due by August 2, 2021 (since July 31 is a Saturday). The payment amount is calculated by multiplying the "applicable dollar amount" by the "average number of covered lives" for the plan year. The “applicable dollar amount” is adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services. 

The following chart reflects the respective applicable dollar amounts for policy years and plan years that end on or after October 1, 2019, and before through October 1, 2021:

Plan sponsors can use the actual count method, the snapshot method, or the Form 5500 method to determine the average number of lives covered during a plan year. Calendar year sponsors that elect to use the Form 5500 method for counting lives must file their appropriate 2020 Form 5500 by August 2, 2021. Our alerts as of July 6, 2016, and July 2, 2013, provide additional information about counting lives.

CHEIRON OBSERVATIONS: Plan sponsors should determine which method of counting covered lives is most advantageous.

Cheiron health consultants can assist with your determination of covered lives and calculation of the PCORI fee due for 2020.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.