IRS releases updated PCORI fees for plan years ending after October 1, 2019
On June 8, 2020, the IRS issued Notice 2020-44 announcing the revised PCORI fee amount for plan years ending between October 1, 2019 and before October 1, 2020. For affected plans within this timeframe, the new “applicable dollar amount” used to calculate the PCORI fee is $2.54.
“The applicable dollar amount that must be used to calculate the fee imposed by Sections 4375 and 4376 for policy years and plan years that end on or after October 1, 2019, and before October 1, 2020, is $2.54.”
The notice also provides some transition relief for identifying the number of covered lives for policy/plan years ending on or after October 1, 2019.
Form 720
The IRS has not yet updated Form 720 or its instructions. On its PCORI website, the IRS notes that specific rules associated with the PCORI rate updates and filing requirements are currently being worked on and will be updated soon. It is not clear if the IRS will update Form 720 before the July 31 deadline or if it intends to provide a later due date for plans with plan years ending between October 1, 2019, and December 31, 2019.
All Employers should pay the tax for all employees covered in plans like The Difference Card.
Your insurance carrier is responsible for paying the tax on underlying plans that are fully insured. You will only be responsible for paying the tax ONCE per year based on your Difference Card covered lives.
The Difference Card will provide you with a report containing the total number of covered lives for your plan year. You will then complete IRS Form 720 Quarterly Federal Excise Tax Return.
*The Difference Card does not provide legal or tax advice and recommends that you discuss all related items with your company tax/finance advisor.
Key Takeaways
- IRS Notice 2020-44 (June 8, 2020) sets the PCORI applicable dollar amount at $2.54 for plan years ending on or after October 1, 2019 and before October 1, 2020.
- The notice provides transition relief for identifying the number of covered lives for policy/plan years ending on or after October 1, 2019.
- The IRS has not yet updated Form 720 or its instructions; rules and filing requirements related to the PCORI rate update are being worked on and it is unclear if Form 720 will be updated before the July 31 deadline or if a later due date will be provided for plans ending Oct 1–Dec 31, 2019.
- Employers must pay the PCORI tax for employees covered by plans like The Difference Card, while insurance carriers are responsible for paying the tax on fully insured underlying plans; the tax is paid once per year based on Difference Card covered lives.
- The Difference Card will provide a report with the total number of covered lives for the plan year so the employer can complete IRS Form 720; The Difference Card does not provide legal or tax advice and recommends consulting the company tax/finance advisor.
