How to Calculate PCORI Fees? Calculation Methods and Filing Tips (2026 Guide)
What Is the PCORI Fee?
The Patient-Centered Outcomes Research Institute PCORI fee is a federal excise tax that helps fund medical research comparing the effectiveness of different healthcare treatments. It applies to:
- Self-insured health plans (employer pays directly)
- Health Reimbursement Arrangements (HRAs)
- Specified health FSAs
- Fully insured health plans (insurance carrier pays, not the employer)
Although it was originally set to expire in 2019, the SECURE Act extended PCORI fees through plan years ending before October 1, 2029, making it a long-term compliance task for health plan sponsors.
Why the PCORI Fee Exists
The PCORI fee was created under the Affordable Care Act (ACA) to fund the Patient-Centered Outcomes Research Institute, a non-profit organization that studies the effectiveness, risks, and benefits of different medical treatments. The research helps patients, doctors, employers, and insurers make better-informed healthcare decisions. Every dollar collected through Form 720 directly supports comparative clinical effectiveness research, making PCORI fees one of the few federal excise taxes with a clearly defined healthcare mission.
PCORI Fee Rates for 2026
The IRS adjusts the PCORI fee each year based on increases in national health expenditures. Here are the current rates plan sponsors must use when calculating their liability for 2026 filings:
PCORI Fee Rates by Plan Year
| Plan Year Ending | Fee Per Covered Life | Filing Year | Due Date |
|---|---|---|---|
| Oct 1, 2024 – Sept 30, 2025 | $3.47 | 2026 | July 31, 2026 |
| Oct 1, 2025 – Sept 30, 2026 | $3.84 | 2026 | July 31, 2026 |
Plans ending earlier in the year (Jan–Sept 2025) use the $3.47 rate, while plans ending later (Oct 2025–Sept 2026) use the $3.84 rate.
How to Calculate PCORI Fees: The 3 IRS-Approved Methods
The IRS allows plan sponsors to choose one of three methods to determine the average number of covered lives. You can use a different method each year, but the same method must be applied consistently across all participants within the same plan year.
1. Actual Count Method
Add the total number of covered lives for each day of the plan year, then divide by the total number of days in the plan year.
Formula: Average Covered Lives = Sum of daily covered lives ÷ Total days in plan year
This is the most accurate method but requires daily enrollment tracking.
2. Snapshot Method
Pick one date per quarter (or an equal number of dates per quarter) and count covered lives on those dates. Add the totals and divide by the number of dates used.
- Dates must be within three days of each other across quarters (e.g., the 15th of each quarter's first month).
- You may use a snapshot factor that counts each employee with self-only coverage as one life and each employee with family coverage as 2.35 lives.
3. Form 5500 Method
For self-insured plans that file Form 5500, take the number of participants at the beginning and end of the plan year, add them, and divide by 2.
- For self-only coverage, use this average directly.
- For plans with dependents, add the beginning and end participant counts together (without dividing) to estimate total covered lives.
Comparison of PCORI Calculation Methods
| Method | Best For | Accuracy | Effort Required |
|---|---|---|---|
| Actual Count | Plans with stable HR systems | Highest | High (daily tracking) |
| Snapshot | Mid-sized plans with quarterly data | Medium-High | Moderate |
| Form 5500 | Self-insured plans already filing 5500 | Moderate | Lowest |
Special Rule: HRAs and Health FSAs
When calculating PCORI fees for HRAs or specified health FSAs, count only employees—not their spouses or dependents. Each participating employee counts as one covered life, regardless of family enrollment.
If you sponsor a self-insured medical plan and an HRA, you only pay the PCORI fee once per covered life when both plans have the same plan year.
Who Is Exempt from PCORI Fees?
Not every health benefit triggers a PCORI fee. The IRS specifically excludes the following from PCORI calculations:
- Excepted benefits such as standalone dental and vision plans
- Employee Assistance Programs (EAPs) that don't provide significant medical care
- Health Savings Accounts (HSAs) — these are individually owned and not considered a plan
- Stop-loss insurance policies
- Plans covering primarily employees working outside the United States
- Government plans like Medicare, Medicaid, and TRICARE
Understanding what to exclude is just as important as knowing what to count. Including ineligible plans inflates your liability, while missing eligible ones can trigger IRS underpayment notices later.
A Simple Example of How to Calculate PCORI Fees
Let's say a self-insured plan has a year ending December 31, 2025, with an average of 250 covered lives using the Snapshot Method.
- Applicable rate: $3.47 (plan year ends within Oct 2024–Sept 2025 window)
- PCORI Fee = 250 × $3.47 = $867.50
This amount is reported on Form 720, Part II, IRS No. 133 and paid by July 31, 2026.
Common Mistakes Businesses Make When Calculating PCORI Fees
Even experienced HR and finance teams stumble on a few recurring issues when calculating PCORI fees each year. Avoid these pitfalls:
- Using the wrong rate. Plan sponsors often apply the prior-year rate when their plan year ends in the new fee window. Always match the rate to your plan year-end date.
- Double-counting employees. If your self-insured medical plan and HRA share the same plan year and same covered employees, you pay the fee once—not twice.
- Forgetting retirees and COBRA participants. These individuals must be included in the covered lives count.
- Switching methods mid-year. You can change methods between plan years, but not within the same plan year.
- Missing the July 31 deadline. Unlike other Form 720 deadlines that fall quarterly, the PCORI fee deadline is fixed each year on July 31.
A single miscalculation can mean overpaying by hundreds of dollars or, worse, receiving an IRS deficiency notice. Always cross-check your covered lives count against payroll and benefits data before filing.
How to File and Pay Your PCORI Fee
The PCORI fee is reported once a year on the second-quarter Form 720, even though Form 720 is normally a quarterly excise tax return. Filing steps:
- Complete Part II of Form 720 under IRS No. 133.
- Enter the average number of covered lives and applicable rate.
- Multiply to get the fee owed.
- Pay through EFTPS (Electronic Federal Tax Payment System).
- File electronically with an IRS-authorized provider for faster processing.
You can file your PCORI fee online through eFileExcise720 in under 5 minutes with built-in calculators and real-time IRS acknowledgment.
Recordkeeping: What to Keep and for How Long
The IRS recommends keeping all PCORI-related records for at least four years from the date the fee was due or paid—whichever is later. This includes:
- The method used to calculate covered lives
- Enrollment census reports
- Form 5500 filings (if used in the calculation)
- Copies of filed Form 720 returns and EFTPS payment confirmations
- Plan documents identifying the plan year and coverage type
Strong documentation is your best defense in case the IRS questions your numbers. With an IRS-authorized e-file provider, your filings are stored securely in your account dashboard, making audit response far easier than digging through paper files.
Filing Tips to Stay Compliant in 2026
- File early. The deadline is July 31, 2026, but paper Form 720 submissions are facing major IRS backlogs in 2026. E-filing avoids automated penalty notices.
- Don't confuse Form 720 with Form 8849. Use Form 720 to report and pay PCORI; use the 8849 form only to claim refunds on overpaid excise taxes. See our breakdown of Form 720 vs Form 8849.
- Made a mistake? Correct it using Form 720-X online filing.
- Filing late? Use our Form 720 late filing service to minimize penalties and interest.
- Document your method. Keep records of how you counted covered lives in case of an IRS audit.
Why E-Filing Is the Smart Choice for PCORI in 2026
In 2026, the IRS is operating with reduced staffing and historic paper backlogs. Paper-filed Form 720 returns—including those reporting the PCORI fee—are taking weeks to process, and many trigger automated penalty notices simply because they remain unopened. Under Executive Order 14247, the federal government is also accelerating its shift toward fully electronic payments and filings.
E-filing your PCORI fee through an IRS-authorized portal like eFileExcise720 gives you:
- IRS acknowledgment within minutes
- Built-in covered-lives calculators
- Auto-applied rates based on your plan year-end
- Secure EFTPS payment integration
- A complete digital audit trail
For plan sponsors juggling multiple compliance deadlines, this isn't just a convenience—it's a risk-reduction strategy. Businesses that previously mailed their Form 720 are switching to online filing in record numbers in 2026, especially after the IRS Inspector General's filing season readiness report flagged paper processing as a major bottleneck.
Final Thoughts: Plan Ahead for July 31
Knowing how to calculate PCORI fees is only half the battle—planning ahead is what keeps you compliant. Mark your calendar for July 31, 2026, reconcile your covered lives data by late spring, choose the calculation method that matches your data quality, and file electronically to lock in IRS acknowledgment. Whether you're a small employer with an HRA or a large self-insured plan sponsor, the combination of accurate math, the right method, and on-time e-filing turns PCORI compliance from a yearly headache into a routine task.