Missed PCORI. Now What?

Now that PCORI season has officially passed, we wanted to take the time to address a recurring question that we often receive from clients: “what happens if we missed the filing deadline or have never filed?”

As you can imagine, this inquiry is quite popular around this time of year, with clients being inundated with Compliance-related deadlines such as Forms 5500s. Unlike 5500s and the delinquent filer program, the IRS has never articulated any formal guidance for clients to follow when they fail to pay the annual PCORI fee or when they are playing catch up for missed payments in previous years. Although, our general advice is always for clients to file as soon as practicable, as if they had filed timely. Potential penalties may of course be steeper for an employer that intentionally neglects to correct a missed filing versus an employer that is caught by the IRS.

While the IRS may levy fines or penalties as a result of a late PCORI payment, it is advisable to get out in front of this rather than to willfully neglect the yearly requirement. This can be accomplished by filing a Form 720 for the applicable year(s) or exact quarter(s) that were missed. For example, an employer that missed their 2023 PCORI fee filing that was due July of 2024 must file the 2024 Q2 version of the Form 720 showing the correct dates and amounts on Line 133(c) and 133(d). Furthermore, if a Form 720 was filed for that particular quarter but just did not include PCORI fees (e.g., the employer used the Form 720 to pay an unrelated excise tax), then a Form 720-X should be deployed instead. The distinction here is that an employer would technically be “correcting” a previously filed Form 720. It is neither accurate nor advisable to attempt to pay for multiple years of missed PCORI filings on a single Form 720. If fines or penalties are assessed at a later time by the IRS, then they would be paid then.

The PCORI rules do not clearly define a penalty amount for a failure to file, but the fee is considered an excise tax and is outlined in Code §6651. Resultingly, penalties of 5% of the amount due for each month the return is late may apply, with a cap of 25% of the total unpaid amount due for not filing a Form 720. In addition to penalties, there may be interest charged for the unpaid taxes, but it is quite possible that employers with reasonable cause that did not willfully neglect to file may have any fines waived by the IRS.  

What if an employer simply made an error on their filing and want to correct it? That is also where a Form 720-X would come in. The Form 720-X is utilized specifically for making adjustments to previously filed Forms 720 and not for curing filings that were completely missed.  

A friendly reminder that for fully insured plans, health insurance carriers pay the fee to the IRS. Employers and the sponsors of self-funded plans, on the other hand, are responsible for paying the PCORI fee directly to the IRS via a Form 720. For PCORI purposes, this also includes “level-funded” plans and most Health Reimbursement Arrangements (HRAs), including ICHRAs. A list of the types of coverages subject to PCORI fees are noted here.  

Additional details related to filing instructions and the Form 720 can be found here. Please also see our previous guidance on PCORI here. For any of your current or future PCORI needs, please do not hesitate to reach out to your AssuredPartners Account Manager for assistance.   

Additional Link:

• Prior Year IRS Forms