COBRA and Retirees in the PCORI Count
Both groups count. IRS Q&A 6 asks directly whether people on COBRA, retirees, and other former employees are lives covered for the PCORI fee. The answer is yes, and it includes their beneficiaries. COBRA is the federal law that lets people keep group health coverage after certain events, such as leaving a job.
The real risk is practical. Active employees sit in the payroll system, while COBRA and retiree enrollment often sit somewhere else. A count built only from payroll will miss them. This article is a working checklist for finding those people before you report the PCORI fee.
People to include and leave out of a self-insured count
If your plan is self-insured, you are the one counting. If the same coverage is insured, the issuer is responsible for the fee, so these people go in its count and not yours. The IRS coverage chart says this for both COBRA and retiree coverage.
| Person | Count them? | Basis |
|---|---|---|
| Former employee on COBRA | Yes | Q&A 6; chart |
| Spouse or child who elected COBRA alone, such as after a divorce | Yes | Q&A 6 includes beneficiaries; the regulations cover qualifying beneficiaries |
| Active employee on COBRA or similar continuation coverage | Yes | 26 CFR 46.4377-1(a)(1) |
| Person on continuation coverage under a state law | Yes | 26 CFR 46.4377-1(a)(1) includes similar state law coverage |
| Retiree in the plan, and a covered spouse or dependent | Yes | Q&A 6 |
| Other former employee kept on the plan, such as under a severance arrangement | Yes | Q&A 6 says other former employees |
| Person who declined COBRA or a retiree option | No, once active coverage ended | Q&A 5 counts people who are covered |
| Person enrolled only in a stand-alone dental or vision option | No | Chart: stand-alone dental or vision is not subject |
| Person covered solely by a fully insured option of the same plan | Sponsor may leave out | 26 CFR 46.4376-1(c)(2)(vii) |
A retiree who also has Medicare is a harder case to answer from the sources. Medicare itself is exempt from the fee, but neither the chart nor the Q&A carves a person out of an employer plan because they also have Medicare. The general rule says to count all covered individuals. If this is a large group for you, get your advisor to confirm your treatment.
Retirees on an HRA follow the HRA row of the chart. Its one-life-per-employee count applies only to participants who aren't also in another self-insured plan of the same sponsor.
How do you get COBRA and retiree enrollment data?
The IRS does not say where your records must come from. It only requires one of the permitted methods and consistent use for the plan year. Here is a practical order of work:
- Pick the method first. Actual count needs daily figures. Snapshot needs one or more dates per quarter. Form 5500 uses the participant totals reported on that form, provided it is filed by the fee's due date.
- Ask your third-party administrator for an enrollment report. Request every covered person on each count date, split into active, COBRA, and retiree, with dependents shown.
- Ask your COBRA vendor separately if a different company runs COBRA. Request elections, start and end dates, and covered family members.
- Pull retiree billing or pension-deduction lists. Compare them with the administrator's enrollment file, because retirees may be billed outside payroll.
- Remove duplicates. A person who moved from active to COBRA can appear in both files around the change date.
- Keep the reports. Save the files and the arithmetic with your return.
Worked example: what a payroll-only count misses
Cedar Point Manufacturing is a made-up employer with a self-insured plan. Its plan year runs July 1, 2025 to June 30, 2026, so the rate is $3.84. It uses the snapshot count method and counts on the 15th of the middle month of each quarter.
| Count date | Active employees and dependents | COBRA | Retirees and spouses | Total |
|---|---|---|---|---|
| Aug 15, 2025 | 520 | 14 | 66 | 600 |
| Nov 15, 2025 | 515 | 18 | 66 | 599 |
| Feb 15, 2026 | 530 | 12 | 65 | 607 |
| May 15, 2026 | 524 | 11 | 63 | 598 |
| Sum | 2,089 | 55 | 260 | 2,404 |
The average is 2,404 divided by 4, or 601 lives. The fee is 601 x $3.84, or $2,307.84.
A payroll-only count would give an average of 522.25 active lives (2,089 divided by 4). That misses 78.75 average lives, which is $302.40 of fee at this rate. The PCORI fee calculator can price the same gap using your own totals.
If you find missed people after filing
This comes up when a new benefits manager discovers a retiree file nobody used. IRS Q&A 16 says corrections to a previously filed Form 720 are made on Form 720-X. Q&A 15 says an overpayment cannot be used to reduce the fee due the following July 31. Form 720-X is the path for that too. For the amended return itself, see our Form 720-X guide.
Filing once the count is complete
Once your report includes all three groups, the return only needs the average, not the list of names. In EasyFile720 you enter the average lives you calculated, and the rate and fee math are handled for you. We don't count your lives or choose your method, so do the checklist above first. Creating an account is free and needs no credit card. You pay $39.95 when you file, and guided steps take you from business details to your electronic signature. If you are a preparer or administrator handling this for several employers, you can file the PCORI fee for each client business under one account.
FAQ
Someone was offered COBRA but never elected it. Do I count them?▼
No, not after their active coverage ended. The count covers people who were actually covered during the plan year, so a person who declined COBRA drops out from that point.
Does COBRA in a grace period count as covered?▼
The IRS PCORI sources do not address grace periods or later cancellations. Use your plan's actual enrollment records and keep a note of how you treated those cases.
We found retirees we left out of last year's count. What now?▼
The IRS says corrections to a previously filed Form 720 are made on Form 720-X. The instructions also say not to enter adjustments for prior quarters on Form 720.
Do retirees living in another country count?▼
The IRS exception is for plans designed specifically to cover employees working and residing outside the United States. The sources have no separate rule removing a former employee from an otherwise U.S. plan, so ask your advisor before excluding anyone on that basis.
File your PCORI fee online
Create a free account with no credit card and build your return. You pay $39.95 only when you file. EasyFile720 is an IRS-authorized e-file provider, and you get an acknowledgment when the IRS accepts your return.
Sources: IRS PCORI Questions and Answers (Q5, Q6, Q15, Q16); IRS chart of PCORI coverage types; 26 CFR 46.4376-1; 26 CFR 46.4377-1; Instructions for Form 720 (Rev. June 2026). General information, not tax advice. Confirm how the rules apply to you with a qualified advisor or the IRS.
