If you sponsor a self-funded or level-funded health plan, there is a compliance deadline coming up fast that is easy to miss and carries real penalties if you do. The PCORI fee for plan years ending in 2025 is due to the IRS by July 31, 2026, and the form you need to file was just updated by the IRS on July 7, 2026, after an earlier version released in June was withdrawn.
This post covers everything self-funded and level-funded employers need to know right now: what the PCORI fee is, who has to pay it, how much it is for 2026, how to calculate what you owe, and exactly what to do before the deadline arrives.
What the PCORI Fee Is and Why It Exists
The Patient-Centered Outcomes Research Institute fee, commonly called the PCORI fee, was established under the Affordable Care Act to fund research that helps patients, physicians, and policymakers make better-informed healthcare decisions by comparing the effectiveness of different medical treatments and approaches. The fee has been in place since 2012 and was extended for an additional ten years, meaning it will continue to apply through at least 2029.
The fee is modest in dollar terms but the obligation to file and pay it is real, and missing the deadline creates IRS penalties that are straightforward to avoid with a little advance preparation.
Who Is Required to File and Pay
The filing and payment responsibility depends on your plan structure, and this is an area where employer obligations differ significantly based on whether the plan is fully insured or self-funded.
Fully Insured Plans
If your health plan is fully insured, meaning you pay a fixed premium to an insurance carrier, the carrier is responsible for filing Form 720 and paying the PCORI fee. The cost is typically built into your premium. Employers with only fully insured health plans have no direct filing requirement and no action is needed.
Self-Funded and Level-Funded Plans
If your company sponsors a self-funded or level-funded health plan, you are directly responsible for filing Form 720 and paying the PCORI fee to the IRS. This applies to self-funded major medical plans, health reimbursement arrangements, and certain other arrangements. The obligation sits with you as the plan sponsor, not with your TPA or stop-loss carrier, though your TPA may be able to assist with the calculation.
It is worth noting that if your company sponsors both a self-funded medical plan and an HRA where the participants overlap, you generally count covered lives only once using the medical plan numbers and disregard the HRA for PCORI fee purposes. If you sponsor only an HRA, you count participating employees but not their dependents or beneficiaries.
The 2026 Fee Rates
The amount you owe depends on when your plan year ended in 2025. The IRS sets different rates based on the plan year end date, and the updated Form 720 includes separate lines for each rate.
- Plan years ending January 1, 2025 through September 30, 2025: $3.47 per covered life
- Plan years ending October 1, 2025 through December 31, 2025: $3.84 per covered life
For most calendar year plans ending December 31, 2025, the applicable rate is $3.84 per covered life. This represents an increase of $0.37 from the prior year rate of $3.47.
How to Calculate What You Owe
The PCORI fee is calculated by multiplying the applicable rate by the average number of covered lives under your plan for the year. The IRS permits three methods for calculating average covered lives, and you may use whichever method is most practical for your plan.
The Actual Count Method
Add up the total number of covered lives for each day of the plan year and divide by the number of days in the plan year. This produces the most precise count but requires day-by-day enrollment data.
The Snapshot Method
Count the number of covered lives on one date in each quarter of the plan year, or on the same date each month, and average those counts. This is simpler than the actual count method and is the most commonly used approach by smaller employers.
The Form 5500 Method
If your plan files a Form 5500, you can use the participant counts reported there. Add the number of participants reported at the beginning and end of the plan year and divide by two. This method is only available to plans that actually file a Form 5500.
Regardless of which method you use, covered lives include employees, dependents, COBRA participants, retirees, and other former employees enrolled in the plan. The PCORI fee obligation applies across all covered individuals, not just active employees.
A Critical Note on the Form: Use the July 7, 2026 Version
This is an important detail that employers need to pay attention to right now. The IRS released an updated Form 720 on June 26, 2026, but subsequently withdrew that version. On July 7, 2026, the IRS released a new updated Form 720 that replaces the withdrawn version.
Employers must use the most current version of the form, which is the one dated July 7, 2026. You can identify the correct form by looking for the date in the bottom right-hand corner of the first page, which should read July 6, 2026 or July 7, 2026 depending on the display format. If you downloaded the June version and have not yet filed, do not use it. Download the current version from IRS.gov before proceeding.
If you already filed using the June 26 version, you should consult with your tax advisor or legal counsel to determine whether corrective action is necessary. The IRS has not issued formal guidance on the impact of filing the withdrawn version, and professional advice in that situation is warranted.
How to File and Pay
The PCORI fee is reported on Part II, IRS No. 133 of Form 720. Use Line 133(c) for plan years ending before October 1, 2025 and Line 133(d) for plan years ending on or after that date.
The form should be filed for the second quarter ending June 30, 2026, regardless of your plan year. The quarter field should reflect June 2026 and the filing year should reflect 2026. Payment can be made by check using the Form 720-V payment voucher included with the form, or electronically through the IRS Electronic Federal Tax Payment System, commonly known as EFTPS. E-filing is available through IRS-authorized e-file providers and is the preferred method as it provides immediate confirmation and reduces the risk of processing errors or postal delays.
A few additional items worth noting: the PCORI fee cannot be paid from plan assets. It must come from the general assets of the employer. It is also not a permissible expense of a self-insured plan and should not be included when calculating COBRA premiums. The fee is generally tax-deductible as an ordinary business expense.
There are no extensions available for the PCORI fee deadline. Missing July 31 triggers a failure-to-file penalty of 5% of the unpaid fee per month and a failure-to-pay penalty of 0.5% per month, plus interest. With only a few days remaining, acting now rather than waiting is the only advisable course.
Quick Reference Checklist Before July 31
- Confirm whether your plan is self-funded or level-funded and therefore subject to the PCORI fee
- Download the current Form 720 dated July 7, 2026, from IRS.gov, not any earlier version
- Obtain covered life counts from your TPA or plan records
- Select your counting method and calculate average covered lives
- Apply the correct rate: $3.47 for plan years ending January through September 2025, or $3.84 for plan years ending October through December 2025
- Complete Form 720, Part II, IRS No. 133, using Line 133(c) or 133(d) as appropriate
- File and pay by July 31, 2026, electronically if possible
- Retain a copy of the filed form and payment confirmation for your records
How Cypress Benefit Solutions Can Help
Annual compliance obligations like the PCORI fee are one of the many areas where having a knowledgeable benefits advisor in your corner makes a difference. We help our employer clients stay current on filing requirements, understand what applies to their specific plan structure, and avoid the kind of missed deadlines that create unnecessary IRS exposure.
If you are unsure whether your plan is subject to the PCORI fee, need help understanding the covered life calculation, or have questions about any aspect of this filing, reach out to us and we will help you work through it. And if you have already filed the withdrawn June 26 version of the form, this is a good time to connect with your tax advisor to confirm whether any follow-up is needed.
