New 2024 - 2025 IRS HSA contribution limits and PCORI fee compliance

Newly released IRS Health Savings Account (HSA) cost-of-living adjustments

On May 9th, the IRS released the updated HSA cost-of-living adjustments for 2025.

The cost-of-living updates for Flexible Spending Arrangements (FSAs) and Qualified Transportation Plans will be released later in the year. The release will allow plan sponsors and participants to plan for 2025 enrollment.

Upcoming PCORI fees due

The Affordable Care Act established a non-profit corporation, the Patient-Centered Outcomes Research Institute (PCORI), which funds clinical effectiveness research with the goal of helping patients make more informed healthcare decisions. PCORI is funded by annual fees paid by certain health insurers and sponsors of self-insured health plans, including Health Reimbursement Arrangements (HRAs). Although the PCORI fee requirement was originally designed only to apply to plan years ending before October 1, 2019, the Consolidated Appropriations Act, 2020 extended the PCORI fee requirement through plan years ending September 30, 2029.

HRA plan sponsors are required to report relevant information for PCORI fees on IRS Form 720 for the second quarter of the year and pay the fee as an excise tax to the IRS. Form 720 is used to report a host of other excise taxes unrelated to an employer’s benefits plans quarterly, so a plan sponsor may or may not report other information on Form 720 in addition to PCORI fees. 

Fees are generally due on July 31 of the calendar year following the year in which the HRA plan year ended. In other words, HRA plan years that ended in 2023 must report information on the 2024 second quarter Form 720 due no later than July 31, 2024, to the IRS. For 2024, the adjusted fee is $3.00 per participant for plan years ending between January 1, 2023, and September 30, 2023, and $3.22 for plan years ending between October 1, 2023 and December 31, 2023. 

There are multiple methods for determining the number of participants for a given plan year. A plan sponsor is permitted to choose any of the permitted methods to calculate the average number of covered lives under the plan. For HRAs, participants include only enrolled employees and do not include spouses or dependents. In addition to the HRA, if an employer sponsors a self-funded medical plan, the employer must pay a fee for both the medical plan and the HRA. However, participants covered by both the health plan and HRA only need to be counted once when determining the number of participants. 

In order to make PCORI fee compliance as simple as possible for our customers, Forma calculates the average number of covered lives and the total PCORI fee that our HRA customers must pay. We also pre-populate Form 720 and send it to our customers along with instructions for review, submission of Form 720, and payment of the fee. Customers simply need to review, process payment, and send it to the IRS.

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