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July 2024 Benefits Buzz: Group health plans and PCORI fees deadline 

Benefits Buzz 2024 July

Group health plan fiduciary litigation on the rise 

Enforcement of the Employee Retirement Income Security Act’s strict standards of fiduciary conduct has traditionally been reserved for retirement plan sponsors. However, a new class action lawsuit highlights the importance of employers’ adherence to their fiduciary duties when managing their group health plans. 

The lawsuit against Johnson & Johnson alleges the company violated its ERISA fiduciary duties by mismanaging its prescription drug benefit, which cost the health plan and participants millions of dollars. It serves as a reminder to employers that they must prudently select and monitor plan service providers, such as pharmacy benefit managers. 

Although it is the first case of its kind, more fiduciary litigation involving the management of prescription drug benefits is expected as the PBM industry faces increasing scrutiny and new transparency laws provide employees with more information regarding healthcare costs.  

Why is there a lawsuit? 

ERISA includes strict standards of conduct for the management of employee benefit plans and their assets. ERISA requires fiduciaries to discharge their duties regarding employee benefit plans: 

  • solely in the interest of plan participants and beneficiaries; 

  • for the exclusive purpose of providing plan benefits or for defraying reasonable expenses of plan administration; and 

  • with the care, skill, prudence and diligence that a prudent person in similar circumstances would use. 

The duty to act prudently is one of a fiduciary’s central responsibilities. 

PCORI fees due July 31 

The Affordable Care Act requires employers with self-funded health plans and health insurance issuers to pay Patient-Centered Outcomes Research Institute fees. PCORI fees are reported and paid annually using IRS Form 720, the Quarterly Federal Excise Tax Return. 

Form 720 and full payment of the PCORI fees are due July 31 annually and generally cover plan years that end during the preceding calendar year. For plan years ending in 2023, the PCORI fees are due by July 31, 2024. 

In general, PCORI fees are assessed, collected and enforced similarly to taxes. The PCORI fee amount is based on the average number of individuals covered under the plan.  

The IRS requires employers with self-funded health plans to use one of three alternative methods to determine the average number of individuals covered under the plan for a plan year: the actual count method, the snapshot method or the Form 5500 method. That number is then multiplied by the applicable rate for that tax year ($3 for plan years ending on or after Oct. 1, 2022 and before Oct. 1, 2023, or $3.22 for plan years ending on or after Oct. 1, 2023 and before Oct. 1, 2024). 

The IRS provides helpful resources regarding PCORI fees, including a chart on how the fees apply to specific types of health coverage or arrangements. 

Have questions? Contact TruePlan. 

Did you like the July Benefits Buzz? If you haven’t already, read our previous issue to learn about health savings account/high-deductible health plan limit increases for 2025 and Health Insurance Portability and Accountability Act privacy changes. Contact TruePlan today for more information or explore our employee benefits services.      

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