The IRS has released Notice 2022-59 to announce the “applicable dollar amount” for the Patient-Centered Outcomes Research Institute (“PCORI”) fee for plan years ending before October 1, 2023.
Background. The PCORI was established under the Affordable Care Act to conduct research evaluating the effectiveness of medical treatments, procedures and strategies that treat diagnose, manage or prevent illness or injury. The PCORI fee requires insurers, and employers with self-funded group health plans, to pay an annual fee to fund PCORI research.
The fee was originally designed to expire for plan and policy years ending after September 30, 2019. However, the Further Consolidated Appropriations Act of 2020 subsequently extended the PCORI fee for 10 years, meaning that insurers and employers will have to continue to pay this fee until 2029 or 2030, depending on their contract or plan year.
Calculating the PCORI Fee. The total PCORI fee is equal to the average number of lives covered during the policy or plan year multiplied by the applicable dollar amount for that year.
Notice 2022-59 confirms that, for policy years and plan years that end on or after October 1, 2022, and before October 1, 2023, the applicable dollar amount is $3.00, up from $2.79 for the previous year.
Plan sponsors may use any of the following methods to calculate the average number of covered lives under the plan:
- The actual count method (plan sponsor adds the totals of lives covered for each day of the year, divided by the total number of days in the plan year).
- The snapshot method (plan sponsor adds the total lives covered on one date in each quarter of the plan year).
- The Form 5500 method (plan sponsor uses a formula that includes the number of participants actually reported on the Form 5500 for the plan year).
Plan sponsors of self-funded plans must remit the PCORI fee to IRS annually along with an IRS Form 720. The payment and Form must be remitted to IRS no later than July 31 of the calendar year immediately following the policy or plan year to which the fee applies.
IRS Notice 2022-59 is available at https://www.irs.gov/pub/irs-drop/n-22-59.pdf