PCORI Fee Deadline July 31: A Construction Employer Guide to Filing Form 720

Every July 31, construction employers who sponsor self-insured health plans owe the IRS a fee that gets almost no attention in the typical benefits conversation: the PCORI fee. The name stands for Patient-Centered Outcomes Research Institute, a federally established research body created by the Affordable Care Act. The fee funds clinical effectiveness research and is filed on IRS Form 720 by July 31 each year, regardless of when your plan year ends.

For a 50-person construction firm where most workers carry family coverage, the total PCORI obligation typically runs a few hundred dollars per year. That is not a significant budget item. What creates real risk is the penalty structure for late or missed filings, combined with the common assumption that the third-party administrator or benefits broker handles the filing automatically. Some do. Some do not. If no one on your team has confirmed in writing who owns this task, there is a meaningful chance the filing has not been made.

This guide covers the full picture: what the PCORI fee is and where the money goes, which construction health plans are subject to it, how to count covered lives accurately for a workforce that includes seasonal hires and project-based crews, how to complete and file Form 720, and what your options are if prior years were missed. The fee rate changes annually via IRS Notice, so the examples below use approximate figures to demonstrate the calculation pattern. Confirm the rate that applies to your specific plan year from the most recent IRS Notice before you file.

What the PCORI Fee Is and Where the Money Goes

The Patient-Centered Outcomes Research Institute was established by the Affordable Care Act to fund studies comparing the clinical effectiveness of different medical treatments. The goal is to give patients, clinicians, and payers better evidence for real-world treatment decisions, so that coverage and care decisions are grounded in comparative evidence rather than marketing claims or outdated protocols.

The fee applies to plan years ending on or after October 1, 2012. It was originally set to expire after seven years but Congress extended it. Under current law, the fee applies to plan years ending before October 1, 2029, making it a continuing compliance obligation through at least the end of this decade for all self-insured plan sponsors.

The amount per covered life has increased gradually over time, indexed loosely to medical inflation. Each year, the IRS publishes the updated rate in a Notice typically released in October or November. To find the correct rate for your plan year, search for the IRS Notice covering plan years ending in the calendar year your plan ran. The Notice will specify a rate for plan years ending within a defined date range. Match your plan year end date to the correct range and apply that rate.

Who Actually Pays the Fee

For fully insured plans, the insurance carrier pays the PCORI fee and typically recovers the cost through the premium. Employers with fully insured coverage do not file Form 720 and do not owe anything directly to the IRS for this purpose.

For self-insured plans, including level-funded arrangements where the employer retains claims risk, the plan sponsor pays the fee directly. The plan sponsor is typically the employer entity. If your health plan is administered by a TPA, the TPA may offer filing assistance as part of their service agreement, but the legal obligation to file rests with you as the plan sponsor unless a written arrangement specifically states otherwise.

Which Construction Health Plans Owe the Fee

Self-Insured and Level-Funded Plans

A self-insured health plan is one where the employer funds claims directly rather than paying a fixed premium to a carrier. The employer bears the claims risk. Stop-loss insurance limits the worst-case exposure, but does not change the underlying structure: the employer is the effective insurer.

Level-funded plans add a smoothing mechanism: the employer pays a fixed monthly amount into a claims account, and stop-loss coverage activates above individual or aggregate claim thresholds. At year-end, unused claims funds are typically returned or credited. Despite the fixed-monthly-payment structure, level-funded arrangements are legally self-insured for ACA and ERISA purposes. The plan sponsor owes the PCORI fee.

This distinction matters for construction employers evaluating funding alternatives. Moving from fully insured to level-funded reduces costs in favorable claims years but adds compliance obligations including the PCORI fee filing. Factor this into your transition planning at renewal.

HRAs and ICHRAs

Health reimbursement arrangements are self-insured employer-sponsored plans and are subject to the PCORI fee. This includes traditional group HRAs that reimburse employees for out-of-pocket costs alongside a group health plan, individual coverage HRAs (ICHRAs) where the employer reimburses employees for individual market premiums and out-of-pocket costs, and excepted benefit HRAs (EBHRAs) funded within the IRS annual contribution ceiling.

When a construction employer sponsors both a group health plan and an HRA, there are two separate PCORI fee obligations in principle. However, the IRS provides a simplification rule: if the HRA is offered only to employees who are already enrolled in the employer's group health plan under the same plan sponsor, you may count each such employee as a single covered life across both arrangements. This combined counting rule reduces the fee burden for employers who offer an HRA as a supplemental benefit to their group plan enrollees.

If the ICHRA is offered to employees who are not enrolled in your group health plan, for example, variable-hour workers who receive an ICHRA to purchase individual market coverage, those employees must be counted separately under the HRA arrangement.

What Is Exempt

Not all benefit arrangements trigger the PCORI fee. The following are generally exempt:

• Health FSAs that qualify as excepted benefits, where employer contributions do not exceed the greater of twice the employee salary reduction or the employee salary reduction plus $500, and the FSA is offered alongside qualifying health coverage
• Self-insured dental and vision plans that are limited to dental and vision care only (these are excepted benefits under the ACA)
• Employee assistance programs that do not provide significant medical benefits
• Stop-loss insurance policies: the stop-loss arrangement itself is not a health plan for PCORI purposes, even though it caps claims under a self-insured arrangement
• On-site medical clinics that provide first aid only or treat minor conditions exclusively

Counting Covered Lives in a Construction Workforce

The PCORI fee is calculated per covered life, not per enrolled employee. A worker who enrolls a spouse and two dependents counts as four covered lives. For construction employers where a significant percentage of workers carry family coverage, the covered-life total will be substantially higher than the employee headcount on the plan.

This is where most construction employers make calculation errors, often by using employee headcount as a proxy for covered lives. The IRS allows three counting methods. Use the one that best fits your enrollment data and administrative capabilities.

The Actual Count Method

Add up every covered life on every day of the plan year and divide by the number of days in the plan year. This produces the most precise average. The challenge for construction firms is that it requires daily enrollment data, which most small-to-mid-size HR systems do not track or export in a usable format. If your HRIS can generate a daily census report, this method is worth considering. Otherwise, the snapshot method gives you a defensible result with far less data gathering.

The Snapshot Method

Take a count of covered lives on one day in each quarter of the plan year. The IRS defines the snapshot dates as the first day of the first, fourth, seventh, and tenth months of the plan year. For a January 1 plan year, those dates are January 1, April 1, July 1, and October 1. Average the four counts.

This is the most practical method for construction employers. You need only four enrollment snapshots, which a standard benefits administration system can produce on demand. Instruct your TPA or HR administrator to pull a census on each of these four dates annually and save the counts.

Example: A construction firm's quarterly snapshots show 142 covered lives in January, 138 in April, 129 in July after a summer wave of seasonal terminations, and 144 in October. The average is 142 plus 138 plus 129 plus 144 divided by 4, which equals 138.25 covered lives. Round to 139 for purposes of the calculation.

The Form W-2 Method

Count the number of employees who had any reportable amount in Box 12, Code DD on their W-2 during the calendar year. Box 12, Code DD reports the cost of employer-sponsored health coverage. This method counts employees only, not dependents, making it appropriate solely for employers who offer self-only coverage uniformly across the workforce. Construction firms that offer family coverage should not use this method unless they want to significantly undercount covered lives and expose themselves to underpayment risk.

You may use different counting methods for different plan arrangements within the same plan year. Once you choose a method for a given arrangement, apply it consistently across the full plan year for that arrangement.

Seasonal and Project-Based Workers

Seasonal employees count as covered lives during the months they are actively enrolled. If a worker enrolls in your plan in May and terminates coverage in September, that worker and any enrolled dependents appear in your April and July quarterly snapshots. They do not appear in your January or October snapshots if they were not yet enrolled or had already terminated. This accurately reflects their partial-year exposure.

Workers who waive coverage, who have not yet reached their plan eligibility date, or who are in a measurement period waiting to qualify under an ACA variable-hour arrangement do not count as covered lives at any point when they are not actually enrolled. Only active enrollment creates a covered-life obligation.

For construction firms that experience large swings in enrolled headcount across seasons, the snapshot method naturally captures this variation. A firm with 200 enrolled workers in peak season and 80 in the slow season will reflect an averaged figure across the four quarterly snapshots, which is the correct representation of actual covered-life exposure across the full year.

Multiemployer and Union Plans

If your construction employees are covered through a multiemployer trust (a joint labor-management fund administering benefits for union members across multiple contributing employers), the PCORI fee obligation typically belongs to the trust as plan sponsor, not to individual contributing employers. The trust files Form 720 and pays based on the total covered-life count across all contributing employers' workforces.

Confirm with your fund administrator that the trust is handling this filing. Most established union funds include PCORI fee compliance in their administrative calendar. A brief written confirmation protects you if the trust ever has an administrative oversight and the IRS sends a notice to contributing employers.

Calculating the Fee and Filing Form 720

The Calculation

Once you have your covered-life count, multiply it by the current year's fee rate per covered life. The rate for your plan year is found in the IRS Notice that covers plan years ending in your plan's calendar period. That Notice is typically published the preceding fall and specifies the rate for plan years ending within a defined date band.

Using the snapshot example from above: 139 covered lives multiplied by a rate of $3.22 per covered life equals $447.58. For a firm of this size, the annual cost of PCORI compliance is under $500, making the penalty for non-filing more costly than the fee itself in any scenario where the gap is discovered more than a few weeks after the deadline.

For construction employers with a higher ratio of family coverage, the math scales accordingly. A 60-person firm where 45 workers carry family coverage (averaging 3 covered lives each, or 135 lives) and 15 carry employee-only coverage (15 lives) has a total of 150 covered lives. At $3.22 per life, the fee is $483. The covered-life count here (150) is 2.5 times the enrolled employee count (60), which illustrates why using headcount as a proxy produces a significant undercount.

Form 720, Part II, Line 133

The PCORI fee is reported on IRS Form 720, Quarterly Federal Excise Tax Return. This is the same form used to report excise taxes on air transportation, coal, and certain other items. Do not let the form's general-purpose nature create confusion. For most construction employers, you are filing it specifically and only for the PCORI fee.

To report the PCORI fee on Form 720:

• Obtain the current year's Form 720 from the IRS. The form is updated annually and the current version is required.
• Go to Part II of Form 720
• Find Line 133, labeled "Issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans"
• Enter your average covered-life count in the Number column
• The applicable rate appears in the adjacent rate column, or confirm it from the IRS Notice for your plan year
• Multiply covered lives by the rate to get the tax amount and enter it on the Tax line
• Carry the amount to the Summary section on Page 2 and include payment

Payment accompanies the return. You can pay by check with the return or through EFTPS (Electronic Federal Tax Payment System). If your construction firm already uses EFTPS for payroll tax deposits, the same account works for the PCORI fee. The EFTPS tax type code for Form 720 is 720.

The July 31 Deadline

Form 720 reporting the PCORI fee is due on July 31 of the year following the end of the plan year. For a calendar-year plan running January 1 through December 31 of year X, the PCORI fee for plan year X is due July 31 of year X plus 1. For a fiscal-year plan ending May 31, the fee for that plan year is also due the following July 31.

If July 31 falls on a Saturday, Sunday, or federal holiday, the deadline moves to the next business day. Given the stakes, confirming the exact deadline date for your specific plan year with your TPA or tax advisor a few weeks before July is a reasonable annual habit.

Four Filing Mistakes That Generate Penalties for Construction Employers

Not confirming who owns the filing. The most common reason construction employers miss the PCORI fee is that no one knew they owned it. When you engage a new TPA, renew a TPA contract, or switch from fully insured to level-funded, ask in writing: does your service agreement include preparation and filing of Form 720 for the PCORI fee? Get the answer in writing. If the TPA does not file, assign the task internally and put July 31 on the compliance calendar with a flag to confirm the previous year's plan-year-end date and applicable rate.

Using enrolled employee count instead of covered lives. If you offer family coverage options, your covered-life total will be higher than your enrolled employee count. Depending on your benefit tier mix, the difference can be 50% to 200% more. Pull the actual enrollment data by coverage tier from your benefits administration system, apply the tier multipliers, and calculate from enrollment records rather than headcount.

Filing with the wrong rate or for the wrong plan year. The PCORI fee rate changes annually. Using last year's rate for this year's filing, or applying the wrong plan year end date to determine which rate applies, produces an incorrect payment. The IRS may assess a penalty for the underpayment. Confirm both the plan year end date and the applicable rate from the IRS Notice before finalizing the calculation.

Missing the HRA filing when you have both a group plan and an HRA. An employer who sponsors a group health plan and an HRA has two separate plan arrangements, each of which may create a PCORI fee obligation. The simplification rule (count each employee enrolled in both as one covered life) applies only if the HRA is offered exclusively to employees already enrolled in the group plan under the same plan sponsor. Verify whether your HRA structure qualifies for the combined counting rule before assuming you can merge the counts.

Catching Up on Missed Prior-Year Filings

If your construction company has been on a self-insured or level-funded plan for several years without filing the PCORI fee, the obligation existed for each of those years. The amount owed includes the fee for each missed year plus interest from the original due date. Penalties may also apply, though first-time filers with an otherwise clean compliance record can request abatement through the IRS penalty relief process.

The standard approach for catching up:

1. Reconstruct covered-life counts for each missed plan year using historical enrollment data from your TPA or HR system
2. Look up the PCORI fee rate applicable to each plan year from the corresponding IRS Notice
3. File a Form 720 for each missed period, showing the covered-life count and fee calculation for that plan year
4. Pay the fee owed plus interest from the original July 31 due date for each missed year
5. If a penalty notice is received, submit Form 843 (Claim for Refund and Request for Abatement) with a brief explanation of circumstances and a request for first-time abatement, if applicable

For most construction employers with two or three missed years, the total catch-up payment is modest. Addressing this proactively, before the IRS identifies the gap independently, consistently produces a better outcome and a more favorable penalty abatement result.

Use the Premium Renewal Stress Test to evaluate your overall benefits cost structure and identify where the PCORI fee fits alongside your other annual compliance and renewal costs.

Related Reading

For additional context on self-insured health plan compliance for construction employers:

• Level-Funded Health Plans: The Middle Ground Between Fully Insured and Self-Funded
• ACA Affordability Rules 2026: What Construction Employers Need to Know About Employer Contributions
• Workers Comp Experience Modification Rate: A Construction Employer Guide

Frequently Asked Questions

Does the PCORI fee apply to our level-funded health plan?

Yes. Level-funded plans are self-insured arrangements for regulatory purposes, even though the monthly payment structure resembles a fully insured premium. As the plan sponsor, your construction company owes the PCORI fee and must file Form 720 by July 31 each year. Your TPA may offer to calculate and prepare the filing as part of their service agreement. Confirm this in writing and clarify whether their service includes making payment on your behalf or only preparing the form for you to submit.

How do we handle seasonal workers when counting covered lives?

Seasonal and project-based workers count as covered lives only for the months they are actively enrolled in the plan. Using the snapshot method, a worker who is on the plan during the April and July snapshot dates but not the January and October dates contributes to two of your four quarterly snapshots. Workers who have waived coverage or who are not enrolled at a given snapshot date do not count. Enrolled dependents count for the same periods as the employee who sponsors the coverage.

We offer both a group health plan and an ICHRA. Do we owe two separate PCORI fees?

Potentially. An ICHRA is a self-insured plan arrangement subject to the PCORI fee separately from your group health plan. If the ICHRA is offered only to employees already enrolled in your group health plan under the same plan sponsor, you can count each of those employees as a single covered life across both arrangements. If the ICHRA is offered to a separate group of employees who are not on your group plan, those employees create an additional covered-life count for the HRA arrangement. Confirm the specifics with your TPA or benefits advisor before combining or separating the counts.

What happens if we file Form 720 late?

Late filings are subject to a failure-to-deposit penalty that starts at 2% of the unpaid amount for payments 1 to 5 days late and increases to 10% or more for payments over 15 days late. Interest accrues from the original July 31 due date. First-time filers with an otherwise clean compliance history may qualify for first-time abatement of the penalty by submitting a written request or Form 843. Filing and paying as soon as the oversight is discovered reduces the total interest that accumulates and demonstrates good-faith correction to the IRS.

Our dental and vision plan is self-insured. Does it owe the PCORI fee?

No. Self-insured dental and vision plans qualify as excepted benefits under the ACA when they are limited to dental and vision care and are either offered separately from major medical coverage or require a separate employee election with an employee contribution. Excepted benefits are not subject to the PCORI fee. If your dental or vision arrangement is integrated into a broader self-insured plan without a separate election structure, consult your benefits attorney to confirm the correct regulatory treatment.