The Deadline That Catches First-Timers Off Guard
You moved to a self-funded plan. You were focused on stop-loss, plan design, and network. Nobody told you about a federal excise tax due every July 31.
That's the PCORI fee. It funds the Patient-Centered Outcomes Research Institute. If this is your first year self-funded, it's probably not on your radar.
It should be. The penalty for missing it is an underpayment of federal excise tax. Not a soft deadline.
What You Owe for 2026
For a calendar-year self-funded plan, your plan year ends December 31, 2025. That puts you in the rate tier for plan years ending on or after October 1, 2025, and before October 1, 2026. According to Beneficially Yours, citing IRS Notice 2025-61, that rate is $3.84 per covered life, up $0.37 from last year's rate of $3.47.
To put that in context, PeopleKeep tracks the historical trend: $3.22 for plan years ending October 2023 through September 2024, $3.00 the year before that, $2.79 the year before that. The rate keeps climbing.
For a 200-person employer with an average of 280 covered lives including dependents, you're looking at roughly $1,075 due by July 31, 2026. Not catastrophic. Unbudgeted cash out the door if you didn't plan for it.
How to Count Your Covered Lives
This is where employers get tripped up. You don't just count employees. You count covered lives, which includes enrolled dependents.
Per Lockton, the IRS gives you three methods to calculate average covered lives.
- Actual Count Method: Add up covered lives for every day of the plan year, divide by the number of days. Most accurate, most work.
- Snapshot Method: Count covered lives on one date per quarter, or one date per month. Average those counts. CRNstone calls this the most commonly used method for self-funded and level-funded plans.
- Form 5500 Method: Use the participant count from your Form 5500 or 5500-SF filing. Simpler, but only works if your 5500 is already filed before you complete your Form 720.
One more thing: if you sponsor an HRA alongside your medical plan, CRNstone notes the IRS allows you to count subscribers only for the HRA, not dependents. That keeps the HRA calculation simple.
The Form and the Filing
You report and pay on IRS Form 720, the Quarterly Federal Excise Tax Return. PCORI is a once-a-year filing, done with the second-quarter return due July 31. Hylant confirms you aren't filing Form 720 four times for this.
Just once, by July 31, for the prior plan year. But you're using a quarterly tax form, which confuses people who see it for the first time.
The fee goes on Part II of Form 720, under IRS No. 133. You report your average covered lives, multiply by the applicable rate, and submit payment through EFTPS or by check with the form.
One edge case worth knowing: if you had a short plan year, or switched plan years mid-year, you might have more than one plan ending in a single calendar year. MyHaus points out that situation requires multiple PCORI calculations on a single Form 720.
If you changed plan years recently, flag this for your CPA or TPA now.
Who Owes It, and Who Doesn't
If you're fully insured, your carrier pays the PCORI fee. That cost is baked into your premium. You don't file anything.
If you're self-funded, including level-funded, this is your obligation. Your TPA can help with the covered lives count, but the employer is responsible for filing and payment.
Did your TPA explain this to you when you went self-funded? If not, ask them to walk through the calculation this year. Know the number before July 31 shows up on the calendar.
The fee isn't large. The compliance exposure for missing it is. Get it on your Q2 task list now.