Even seed-stage employers cannot afford to overlook Form 720 and PCORI fees, as they are important compliance obligations that protect startups from IRS penalties.

Many founders assume their company is “too small” to worry about filing Form 720 and paying PCORI fees, but even startups offering self-insured health plans or HRAs are often subject to these fees.

The most common mistakes include miscounting covered lives, filing Form 720 in the incorrect section, or failing to meet the July 31 deadline.

This employer filing checklist will guide seed-stage founders through all they need to know, including understanding who must pay, calculating the correct fee, meeting deadlines, and completing Form 720.

What Are PCORI Fees?

The Patient-Centered Outcomes Research Institute (PCORI) is a federally funded organization created under the Affordable Care Act to support patient-centered comparative clinical effectiveness research.

This research compares medical treatments, procedures, and care strategies to help patients and clinicians make the right healthcare decisions.

PCORI’s work is funded in part through a dedicated trust fund that receives an annual fee assessed on certain health plans.

PCORI fees (sometimes called the PCORTF fee) are not a payroll tax or an employer income tax; they’re a small per-covered-life assessment designed to seed the Patient-Centered Outcomes Research Trust Fund.

The aggregate money collected each year supports PCORI’s grants and research programs (comparative effectiveness studies, patient engagement projects, methodology research, and dissemination of findings).

In a nutshell, the fee converts a large number of small contributions from insurers and self-insured employers into meaningful research dollars that inform clinical decision-making.

Who is Subject to PCORI Fees? 

Two groups can be responsible for the fee:

• Issuers of specified health insurance policies (the insurer typically pays for fully insured plans), and
• Plan sponsors of applicable self-insured health plans (the employer or plan sponsor pays for self-insured plans).

That means many seed-stage startups will owe the fee if they sponsor a self-insured plan (including many HRAs or level-funded arrangements). The size of the company doesn’t automatically exempt you.

Employers that only offer fully insured plans usually rely on the insurer to handle the fee, but employers should confirm with their carrier or broker.

IRS Background and Regulatory Basis

Congress created the PCORI trust fund through the ACA and authorized the fee (sections 4375 and 4376).

The IRS publishes the legal and practical guidance, including the Form 720 instructions and notices (for example, Notice 2024-83 and the 2025 Form 720/Instructions), that explain which plans are covered, how to count covered lives (actual count, snapshot, member months, Form 5500, etc.), and the filing mechanics.

Since the requirement is statutory and enforced by the IRS, noncompliance can trigger penalties and interest, which is why even resource-lean startups should treat PCORI reporting as a compliance checklist item.

What is Form 720?

IRS Form 720 is the Quarterly Federal Excise Tax Return used to report and pay a variety of federal excise taxes. While Form 720 is issued quarterly, certain taxes reported on it have special annual filing conventions, and PCORI is an example.

The official Form 720 (Rev. June 2025) and its instructions remain the main source for filing mechanics, line references, and current update notes.

How PCORI Fees Fit into Form 720

The PCORI fee is reported on Form 720. Sponsors of self-insured plans and insurers (for fully insured plans) use Form 720 to report the average number of covered lives and calculate the fee (fee = covered lives × applicable per-life amount).

Although Form 720 is quarterly, the PCORI fee is filed once per year using the Form 720 due July 31 following the plan year end. The IRS guidance clarifies that the second-quarter Form 720 is used for the PCORI filing due July 31.

Where to Report on the Form

On the current Form 720 and in the Form 720 instructions, the PCORI fee is shown under the PCORI/health-care-related entries (see Part II, IRS No. 133).

Employers must enter the average number of covered lives and the calculated fee on the correct line; sponsors of self-insured plans generally use line 133(c) to report average covered lives for plan years ending on or before September 30 of the preceding calendar year. Follow the latest Form 720 instructions to avoid misreporting.

PCORI Fee Rates for 2025

The IRS adjusted the PCORI applicable dollar amount to $3.47 per covered life for policy and plan years that end on or after October 1, 2024, and before October 1, 2025.

For plan years that ended after September 30, 2023, and before October 1, 2024, the applicable amount remains $3.22 per covered life.

Here’s how the fee is calculated:

PCORI fee = (Applicable dollar amount) × (Average number of covered lives for the plan year)

“Covered lives” include employees plus covered spouses and dependents under the plan. The IRS accepts multiple methods to determine the average number of lives (actual count, snapshot method, or the Form 5500 method); pick the method that fits your plan documentation and apply it consistently.

Here are some examples:

Plan Ending Dec 31, 2024 (calendar plan year)

• Applicable rate: $3.47 (falls in the October 1, 2024 to September 30, 2025 window).
• Average covered lives: 35 (employees + dependents)
• PCORI fee = $3.47 × 35 = $121.45

Plan Ending June 30, 2025

• Applicable rate: $3.47 (plan year ends before October 1, 2025).
• Average covered lives: 12
• PCORI fee = $3.47 × 12 = $41.64

Plan Ending March 31, 2024

• Applicable rate: $3.22 (this plan year falls in the prior rate window).
• Average covered lives: 50
• PCORI fee = $3.22 × 50 = $161.00

Note the following for filing and payment:

• PCORI fees are reported and paid annually on IRS Form 720 (usually Line 133 for self-funded plans) and are due July 31 of the year following the plan year end. For example, PCORI fees for plan years that ended in 2024 are due July 31, 2025. 
• The IRS issued Notice 2024-83 formalizing the $3.47 amount and the effective window; use that and the Form 720 instructions when preparing your filing.

Step-By-Step Filing Checklist for Seed-Stage Employers

Here are checklists to guide you when filing the PCORI fee:

Determine Your Plan Year

Confirm whether you sponsor an applicable self-insured health plan or whether the insurer pays (fully insured plans). If your company directly pays claims (including HRAs or level-funded arrangements), the plan sponsor (i.e., the employer) owes the PCORI fee.

Note that short plan years (a first year shorter than 12 months) are still subject to the fee. Use plan documents or your broker/TPA to verify the plan year-end date.

Identify Covered Lives (Choose a counting method)

The PCORI fee is assessed per covered life. The IRS accepts several methods to determine the average number of covered lives:

• Actual count: Total covered lives for each day of the plan year divided by the number of days in the year.
• Snapshot method: Count lives on a single day (commonly the last day of the plan year).
• Form 5500 method: Use the number from Box 7 (participants) on Form 5500 for plans that file it.

Pick the method allowed by IRS guidance and be consistent year-to-year. The snapshot method is easiest and defensible (if documented) for small teams. Keep the math and supporting spreadsheets for at least three years.

Calculate the Fee

The applicable rate per covered life depends on the plan year end. For plan years ending in 2024, the IRS set two rates depending on the month:

• Plan year ends January to September 2024: $3.22 per covered life.
• Plan year ends October to December 2024: $3.47 per covered life.

Multiply your average covered lives by the correct per-life rate. Keep a simple calculation worksheet in your records.

Complete Form 720

Form 720 is a quarterly excise return, but PCORI is filed once a year (the return is still Form 720). Here are the steps for completing it:

• Fill the business header (name, EIN, address) and check the correct quarter box as instructed for PCORI filings.
• Go to Part II and locate the line for the PCORI fee (IRS No. 133). Enter the number of covered lives and the calculated fee.
• Transfer totals to the payment lines in Part III and sign the return.
• If you owe nothing (zero), file the return marked appropriately or keep documentation showing no liability.

Follow the Instructions for Form 720 carefully; they include the exact line numbers and where to report PCORI. If you use software or a payroll/benefits vendor, confirm they map to the PCORI lines correctly.

Review Supporting Documentation

Seed-stage employers should keep one packet per plan year that includes:

• Plan documents showing plan year dates.
• Covered-lives calculation spreadsheet (with method explanation).
• Enrollment reports from the TPA or broker.
• Form 720 copy and proof of payment (EFTPS confirmation or check copy).

Keep records for at least three years (longer if your adviser recommends). This packet is your first line of defense in an IRS inquiry.

Submit Form 720 and Pay the Fee

The payment options include:

• EFTPS (recommended). This option is efficient and traceable.
• Paper check with Form 720 mailed to the IRS address for your region if you must use paper (timing and processing are slower).

Electronic filing through an authorized provider or tax preparer reduces errors; small founders often find a CPA or payroll provider handles the Form 720 filing as an add-on service. Confirm the provider properly reports on the correct PCORI line.

Set Up Reminders and Integrate into Your Annual Close

Add PCORI filing to your company’s annual compliance calendar. For instance:

• 60 to 90 days before July 31: Gather enrollment
• 30 days: Prepare Form 720
• 7 to 14 days: Final review and payment

Automate a recurring task in your project tracker or calendar and assign ownership; even a lean startup benefits from one point person responsible for benefits compliance.

Filing Deadlines for PCORI Fees in 2025

The PCORI fee remains a simple but non-negotiable compliance item for seed-stage employers who sponsor self-insured plans. File Form 720, Part II - PCORI and pay the fee no later than July 31, 2025, for plan years that ended in 2024.

The IRS states that the second-quarter Form 720 is used to report the PCORI fee and that the return and payment are due by July 31 of the calendar year following the plan or policy year end.

If July 31 falls on a weekend or federal holiday, normal IRS timing rules apply: the due date moves to the next business day.

In practice, that means you should treat the deadline as the next weekday when July 31 is a Saturday, Sunday, or holiday, but don’t rely on mail postmarks as your only proof if you’re filing close to the deadline. The IRS’s general “when to file” guidance confirms this weekend/holiday shift for tax due dates.

Here’s what happens if you miss the July 31 deadline:

• Failure-to-file penalty: Generally 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.
• Failure-to-pay penalty: 0.5% per month (or part of a month) on the unpaid balance, also capped at 25%. Interest also accrues on any unpaid tax from the due date until paid.

When both penalties apply in the same month, the IRS reduces the failure-to-file penalty by the failure-to-pay amount for that month.

There’s also a minimum penalty rule if a return is filed more than 60 days late: for returns required in 2025, the minimum can be a flat statutory amount (see IRS guidance for the exact figure that applies to the tax year), or in some cases, the lesser of that flat amount or 100% of the unpaid tax.

Here are what you should do if the deadline is approaching (or you’ve already missed it):

• File Form 720 as soon as possible and include Form 720-V if paying by check. Filing late but promptly reduces failure-to-file exposure.
• Pay the tax owed immediately (online EFT or with 720-V) to limit the 0.5% monthly failure-to-pay penalty and daily interest.
• If you have a reasonable cause for missing the deadline, you can request penalty relief, but be prepared to document the facts and timing that demonstrate reasonable cause. The IRS Form 720 instructions and penalty guidance explain the reasonable-cause process.

Final Checklist for 2025 Compliance

How Startups Can Simplify PCORI and Form 720 Compliance in 2025

Every hour that seed-stage startups spend on tax forms is an hour taken from building products or raising capital. Yet Form 720 and PCORI fees are non-negotiable IRS obligations; missing them can lead to penalties, even for teams with fewer than 20 employees.

Fortunately, you don’t have to handle this alone. You can streamline the entire process: identifying whether their plan is self-insured, accurately counting covered lives, applying the right IRS rates, and submitting Form 720 on time, by outsourcing compliance administration to Chore.

Instead of struggling with government instructions, Chore integrates compliance into your back-office workflow, ensuring accuracy, setting automated reminders ahead of the July 31 deadline, and maintaining audit-ready records.

Apart from keeping you compliant with PCORI requirements, this approach also frees your lean team to focus on growth, hiring, and fundraising. This helps you build investor confidence that your company is buttoned up from day one.

Stay focused on growth while Chore handles your compliance. Book a free consultation with Chore today.

FAQs

Can I file PCORI fees online?

Yes. You can pay PCORI fees online through the IRS EFTPS system, but Form 720 usually must be filed on paper unless you use an IRS-approved e-file provider. The best practice is to file Form 720 by mail and pay the fee electronically via EFTPS.

Is Form 720 filed annually or quarterly for PCORI?

Form 720 is filed annually, not quarterly, for PCORI fees. Form 720 is a quarterly excise tax return. But when it comes to PCORI fees, the IRS requires filing only once per year, using the second-quarter Form 720 (covering April to June). The due date is July 31, following the end of the plan year. For 2025, that means July 31, 2025, for plan years ending in 2024. In a nutshell, PCORI fees are reported annually on the second-quarter Form 720.

What if my startup only offers HRAs?

If your startup only offers an HRA, you still owe PCORI fees because HRAs are treated as self-insured plans. You’ll file Form 720, count one covered life per employee, and pay the IRS fee per person. If the HRA is paired with a fully insured plan, the insurer pays for the plan, but you still cover the HRA portion.