What is the PCORI fee?
The PCORI fee is a small federal fee on health coverage that funds the Patient-Centered Outcomes Research Institute, a nonprofit created by the Affordable Care Act to study which treatments work best. The money goes to the Patient-Centered Outcomes Research Trust Fund. Health insurers pay it on fully insured policies, and employers pay it directly on self-insured plans.
This page covers the employer fee reported on IRS Form 720. It is not about PCORI’s research funding, grant applications or project budgets.
The fee is simple in concept: take the average number of lives covered under the plan during the plan year, multiply by the IRS rate for that plan year, and report it once a year. Most mistakes come from using the wrong rate, counting only employees, or forgetting an HRA.
What is the PCORI fee rate for each plan year?
The PCORI fee is $3.84 per covered life for plan years ending October 1, 2025, through September 30, 2026. The rate depends on when your plan year ends, not when you file. The IRS adjusts it each year for growth in national health expenditures.
| Plan year ends | Rate per covered life | Calendar-year plan example | Form 720 due |
|---|---|---|---|
| Oct 1, 2022 to Sep 30, 2023 | $3.00 | Plan year ended Dec 31, 2022 | July 31, 2023 |
| Oct 1, 2023 to Sep 30, 2024 | $3.22 | Plan year ended Dec 31, 2023 | July 31, 2024 |
| Oct 1, 2024 to Sep 30, 2025 | $3.47 | Plan year ended Dec 31, 2024 | July 31, 2025 |
| Oct 1, 2025 to Sep 30, 2026 | $3.84 | Plan year ended Dec 31, 2025 | July 31, 2026 |
| Oct 1, 2026 to Sep 30, 2027 | Set by IRS notice | Plan year ending Dec 31, 2026 | August 2, 2027 (July 31 is a Saturday) |
The $3.84 rate comes from IRS Notice 2025-61. A non-calendar plan year follows the same rule: a plan year that ended June 30, 2025, used $3.47, while one that ended October 31, 2025, used $3.84. Both were due July 31, 2026.
Who pays the PCORI fee?
The insurer pays for fully insured coverage, and the employer pays for self-insured coverage. Many employers have both, and paying premiums on an insured medical plan does not cover a self-insured HRA alongside it.
| Coverage | Who files and pays |
|---|---|
| Fully insured medical policy | The insurance carrier (usually built into your premium) |
| Self-funded medical plan | The employer as plan sponsor |
| Level-funded plan | The employer. A level-funded plan is self-insured with stop-loss attached |
| HRA (stand-alone or paired with an insured plan) | The employer, for the HRA |
| Stop-loss policy | No one. Stop-loss is not a specified health insurance policy |
Retiree-only plans and COBRA coverage are subject to the fee, and COBRA and retiree lives are counted. Coverage that is exempt includes plans made up only of excepted benefits (such as stand-alone dental and vision and most health FSAs), employee assistance, disease management and wellness programs that do not provide significant medical care, coverage only for employees working and living outside the United States, and government programs such as Medicare, Medicaid and CHIP. Tax-exempt and governmental employers are not exempt as sponsors.
Do HRAs and FSAs owe the PCORI fee?
HRAs generally do, and most health FSAs do not. How you count an HRA depends on what else you sponsor.
- HRA with a self-insured medical plan. If the HRA and the self-funded medical plan have the same plan sponsor and plan year, you treat them as one plan and pay once. Don’t count those people twice.
- HRA with a fully insured medical plan. The insurer pays on the medical policy, and you pay on the HRA. Because the HRA is your only self-insured plan, you count one life per employee participant, and you don’t count spouses or dependents.
- HRA only. Same rule: one life per participant.
- Health FSA. A health FSA that qualifies as an excepted benefit, which most do, is exempt. An FSA that fails the excepted benefit test is a self-insured plan and is counted like an HRA.
How do you calculate the PCORI fee?
Employers multiply the plan’s average number of covered lives by the IRS rate, and self-insured plans may count those lives with one of three methods. Use the same method for the whole plan year; you can switch from one year to the next. Count every covered person, including spouses, dependents, COBRA participants and retirees, unless the one-life rule for HRAs or FSAs applies.
| Method | How it works | Best for |
|---|---|---|
| Actual count | Add the lives covered on each day of the plan year and divide by the days in the year | Employers whose TPA can produce daily enrollment data |
| Snapshot | Count lives on one date in each quarter (later dates within three days of the first-quarter date), then average | Employers with steady enrollment and reliable quarterly reports |
| Form 5500 | Use participant counts from the plan’s Form 5500 | Plans that file a Form 5500 for the plan year by July 31 |
Actual count
Add the number of lives covered on each day of the plan year, then divide by the number of days.
Example for a calendar 2025 plan: 200,000 covered-life days ÷ 365 = 547.95 average lives × $3.84 = $2,104.11.
Snapshot count or snapshot factor
Pick a date in the first quarter, then dates in the next three quarters that fall within three days of the same day of the corresponding month. Add the counts and divide by the number of dates.
- Snapshot count: count the actual lives covered on each date.
- Snapshot factor: count each employee with self-only coverage as 1, and each employee with any other tier as 2.35, instead of counting dependents individually.
Example: counts of 560, 565, 570 and 565 = 2,260 ÷ 4 = 565 average lives × $3.84 = $2,169.60.
Form 5500 method
Use the participant counts reported on the plan’s Form 5500 or 5500-SF. This method is only available if that form is filed by the PCORI due date, July 31.
- Self-only coverage only: add participants at the beginning and end of the plan year and divide by 2. Example: (400 + 440) ÷ 2 = 420 × $3.84 = $1,612.80.
- Plan offers dependent coverage: add participants at the beginning and end of the plan year and do not divide by 2. The sum stands in for employees plus dependents. Example: 400 + 440 = 840 × $3.84 = $3,225.60.
Applying the self-only formula to a plan with family coverage is a common way to underpay. Your Form 5500 counts also have to match what the plan reports elsewhere; see the Form 5500 deadline for that filing.
How do you file Form 720 for the PCORI fee?
The fee is reported and paid on IRS Form 720, the Quarterly Federal Excise Tax Return, by July 31 of the year after the plan year ends.
- List every self-insured plan. Include the medical plan, any HRA, and any FSA that is not an excepted benefit. Group plans with the same sponsor and plan year.
- Pick the rate. Use the rate for the date each plan year ended, from the table above.
- Count lives with one of the three methods and calculate the fee.
- Complete Form 720. Report the fee in Part II on IRS No. 133, using the line for applicable self-insured health plans. Enter the average lives, the rate and the fee.
- Pay. Payment is due with the return. If you pay through EFTPS, apply the payment to the second quarter of the year you file.
- Keep your work. Keep the census or count reports behind your average with your plan records.
If you file Form 720 for other excise taxes, report PCORI on your second-quarter return. If PCORI is your only Form 720 liability, you file once a year and do not file for the other quarters. Corrections and overpayments go on Form 720-X; an overpayment for one year cannot be subtracted from the next year’s fee.
A short plan year still owes the fee, using the average lives for that shorter period and the rate for the date it ended.
What happens if you miss the PCORI fee?
A late or missing Form 720 is subject to the IRS’s standard failure-to-file and failure-to-pay penalties, plus interest on any unpaid fee. The most common causes are predictable:
- Assuming the carrier paid it. True for an insured medical policy, not for an HRA or a self-funded or level-funded plan.
- Counting only employees. Unless the HRA or FSA one-life rule applies, spouses and dependents count.
- Using last year’s rate. The rate changes each year, and it follows the plan year end.
- Relying on a vendor without checking. Your TPA may supply the census, but the fee is the plan sponsor’s to file and pay.
Ethos Benefits calculates and files the PCORI fee for clients as part of its compliance services.
Is the PCORI fee tax deductible?
Generally, yes. IRS Chief Counsel Memorandum AM2013-002 concluded that the fee paid by plan sponsors and insurers is an ordinary and necessary business expense, deductible under Code section 162. Confirm the treatment for your organization with your tax advisor.
When does the PCORI fee end?
The fee applies to policy and plan years ending before October 1, 2029. The original ACA fee was set to expire in 2019, and the Further Consolidated Appropriations Act, 2020 extended it for 10 more years. Unless Congress extends it again, a calendar-year plan’s last PCORI filing will be for the plan year ending December 31, 2028, due July 31, 2029, and the last plan years subject to the fee are those ending by September 30, 2029.