Limited transition relief

Notice 2020-44 also provides limited transition relief affecting how plan sponsors of self-insured plans (as well as insurers) calculate the number of covered lives. For plan years ending on or after October 1, 2019 and before October 1, 2020, plan sponsors (and insurers) may use any reasonable method to calculate the average number of covered lives.

Plan sponsors using a reasonable method to do this calculation must use that method consistently for the duration of the plan year.

Plan sponsors may still choose to use one of the three usual methods for calculating the fee: the actual-count method, the snapshot method or the Form 5500 method. (Those methods are described on the IRS website.)

Brief background on the fee

The comparative effectiveness research fee is commonly referred to as the PCORI fee. That’s because the Patient-Centered Outcomes Research Institute (PCORI) is partially funded through collection of this fee from insurers and self-insured group health plans. PCORI conducts research evaluating and comparing health outcomes and assesses the clinical effectiveness, risks and benefits of medical treatments.

The section of the ACA about PCORI and related regulations refer to plan years “ending” before or after specific dates (rather than the more common terminology of plan years “beginning” on or after certain dates). Consequently, it can be difficult to follow IRS guidance about which rate applies to which plan years and determine the deadline for paying the fee. The filing deadline for a 2019 calendar-year plan is July 31, 2020. However, the filing deadline for a plan year that ends in January 2020 through September 2020 would be July 31, 2021, because those plan years end in 2020.