PCORI Fee Deadline Just Around the Corner

In IRS Notice 2025-61, the IRS announced that the adjusted amount of the PCORI fee is $3.84 per covered life for policy and plan years that ended on or after October 1, 2025, and before October 1, 2026 (including 2025 calendar year plans). For policy or plan years that ended on or after October 1, 2024, and before October 1, 2025, the fee is $3.47 per covered life.

PCORI fees are based on the average number of covered lives under the plan or policy. “Covered lives” generally include employees (and retirees) and their enrolled spouses and dependents, as well as individuals who are receiving COBRA or other continuation coverage.  

IRS regulations provide three permissible methods for calculating the number of covered lives under the plan:

1. Actual Count Method.  Under the actual count method, the average number of covered lives for a plan year may be determined by adding the total of lives covered for each day of the plan year and dividing that total by the total number of days in the plan year.
    
2. Snapshot Method.  Under the snapshot method, the total number of lives covered on a date in each quarter of the plan year (or an equal number of dates for each quarter, like the first day of each month) is added together, then divided by the total number of dates on which a count was made.
    
3. Form 5500 Method.  Under the Form 5500 method, the average number of covered lives may be determined based on a formula that takes into account the number of participants reported on the Form 5500 annual report for the plan.

PCORI fees are reported on IRS Form 720 Quarterly Federal Excise Tax Return, which includes a section specific to the PCORI fee. The version of Form 720 should indicate a revision date of June of the year in which the fee is being reported. For fees reported by July 31, 2026, this revision date will be June 2026. Typically, the IRS does not release the June-revised Form 720 until near the middle or end of June; as a result, fees cannot be reported and submitted any earlier.

There is a payment voucher at the bottom of Form 720, which should be completed to show the amount of the payment.  It is essential to check the “Second Quarter” box on the payment voucher when submitting the IRS Form 720 and PCORI fee payment to the IRS.

The Form 720 and PCORI fees are due annually by July 31 of the calendar year following the end date of the policy or plan year to which the fee applies. For example, a plan year that ends on December 31, 2025, will submit the PCORI fee associated with the 2025 plan year by July 31, 2026.

The final regulations do not address whether plan sponsors may correct or amend a previously filed Form 720 if errors were made or a filing was missed. However, the regulations note that the penalties associated with the late filing of Form 720 or late payment of the fee may be waived or abated if the issuer or plan sponsor has reasonable cause and the failure was not due to willful neglect.

According to the FAQ page on the IRS website, “A plan sponsor or policy issuer should make corrections to a previously filed Form 720 by filing a Form 720X, Amended Quarterly Federal Excise Tax Return, including adjustments that result in an overpayment. Form 720X may be filed anytime within the applicable limitation period.”

The final regulations do not include a specific penalty for failure to report or pay the PCORI fee. However, since this fee is considered an excise tax that is reportable on IRS Form 720, any related penalty for failure to file a return or pay a tax will apply. Generally, this penalty is equal to 5% of the total fee amount for each month the filing is late (capped at five months), and/or 0.5% of the total fee amount for each month the payment is late – plus interest.