PCORI for State and Local Governments
A state or local government health plan is subject to the PCORI fee on the same terms as a private employer's plan. Being a government does not exempt it. IRS Q&A 10 says plans for governmental entities are covered unless the plan is an "exempt governmental program," and that phrase means a short list of specific programs, not public employers in general.
So the useful question for a benefits office is not "are we a government?" It is "which arrangement is this, and is any part of it self-insured?" If it is, your entity is the one that has to report the PCORI fee on Form 720.
How does the PCORI fee treat a government plan?
The IRS chart gives state and local government health or major medical plans their own row, covering employees and retirees. The answer is yes, the fee applies. The chart then splits responsibility by how the coverage is funded:
| How the public plan is funded | Subject to the fee? | Who reports and pays |
|---|---|---|
| Insured policy | Yes | The issuer |
| Self-insured | Yes | The plan sponsor |
| Part insured, part self-insured | Yes | The plan sponsor for the self-insured plan. The regulation treats a plan as self-insured if any portion of the coverage is provided other than through an insurance policy. |
For a plan run by one public employer, the plan sponsor is that employer. If the coverage mixes fully insured and self-insured options, the regulation lets the sponsor leave out lives covered solely under the fully insured options when it counts.
What counts as an exempt governmental program?
The regulation at 26 CFR 46.4377-1(b) and IRS Q&A 9 define the list narrowly. These are the programs outside the fee:
- Medicare, the insurance program under title XVIII of the Social Security Act.
- Medicaid, the medical assistance program under title XIX.
- CHIP, the Children's Health Insurance Program under title XXI.
- Military programs established by federal law to provide medical care, other than through insurance policies, to members of the Armed Forces, and their spouses and dependents. The Q&A also names veterans.
- Programs for members of Indian tribes established by federal law to provide medical care, other than through insurance policies.
Notice what ties these together. Each is a program created by federal law for a specific group. None is an employer plan for the staff of a state, city, county, or school district.
Examples of public coverage on each side of the line
The organizations in this table are generic examples. Each answer comes from a chart row or Q&A.
| Situation | Subject? | Who handles it |
|---|---|---|
| A city self-insures major medical for its employees | Yes | The city, as plan sponsor |
| A state buys an insured group policy for state workers | Yes | The issuer |
| A county self-insures a retiree-only medical plan | Yes | The county, as plan sponsor |
| A school district offers COBRA on its self-insured plan | Yes | The district, as plan sponsor. COBRA lives are counted. |
| A city offers an HRA alongside its insured policy | Yes, unless the HRA is an excepted benefit | The issuer on the policy and the city on the HRA, as separate fees |
| A county self-insures stand-alone dental and vision | No | No fee on this coverage |
| A state administers Medicaid | No | Exempt governmental program |
| A state administers CHIP | No | Exempt governmental program |
Running Medicaid does not exempt the state's own employee plan. They are separate things with separate answers, and one public body can sit on both sides of the line.
A worked example for a county with a July to June plan year
The county and the numbers are made up. A county self-insures its employee medical plan on a plan year of July 1, 2025 through June 30, 2026. Using one of the allowed counting methods, it arrives at an average of 1,250 covered lives.
- Rate. The plan year ends on or after October 1, 2025 and before October 1, 2026, so the rate is $3.84. The rate follows the date the plan year ends, not the date it starts.
- Fee. 1,250 x $3.84 = $4,800.00.
- Due date. The fee is due July 31 of the calendar year after the plan year ends. July 31, 2027 is a Saturday, so the county may file on Monday, August 2, 2027.
- Line. Self-insured plans use line 133(c) or 133(d). On the June 2026 revision of Form 720, the $3.84 rate is line 133(d). Use the most current revision when you file.
A plan year ending on or after October 1, 2026 has no rate in the IRS documents we have. The IRS publishes it, so check the second-quarter 2027 Form 720 instructions. Until then you can try your count in the PCORI fee calculator at a published rate for a rough idea only.
Counting is where most of the work sits. Our article on average covered lives walks through the methods. A self-insured sponsor has three: actual count, snapshot, or Form 5500.
How a public entity files
The filing has no special government version. It is the second-quarter Form 720, with Part II, IRS No. 133 completed. Deposits are not required for this fee, and the fee is due with the return. The form needs an EIN and a signature from a person authorized by the entity to sign.
E-filing is available but not required. If your office wants to file Form 720 online, EasyFile720 is an IRS-authorized e-file provider. Creating an account is free and needs no credit card, and you pay $39.95 when you file. You enter the entity's details and your average covered lives, and the rates for the return are built in with the math calculated for you. Validations catch common mistakes before you submit, you sign electronically, and you get an electronic acknowledgment from the IRS once the return is accepted.
Before you begin, have four things ready: the entity's legal name and EIN, the last day of the plan year, your average covered lives, and the name of the person authorized to sign. With those in hand, your next step is to file your PCORI fee online.
The return stays saved in your account, which helps when staff change between one annual filing and the next. There is more detail on how sponsors file on our self-insured health plan page.
FAQ
Our city only buys insured coverage. Do we file anything for PCORI?▼
For the insured policy, the issuer is the party responsible for the fee. You would still need to look at any self-insured arrangement the city runs alongside it, such as an HRA.
Does a public plan get a lower rate?▼
The IRS sources show one rate per plan year band, with no separate rate for governments. For plan years ending on or after October 1, 2025 and before October 1, 2026, it is $3.84 per covered life.
Do we have to file Form 720 every quarter if PCORI is our only excise item?▼
No. A sponsor reporting only the PCORI fee files Form 720 once a year, for the second quarter. It does not file for the first, third, or fourth quarter.
Do retired public employees count?▼
Yes. The IRS chart lists state and local government plans for employees and/or retirees as subject to the fee, and the Q&A says retirees and other former employees on the coverage, with their beneficiaries, must be counted.
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; IRS chart of the PCORI fee on common types of coverage; Instructions for Form 720 (Rev. June 2026); Form 720 (Rev. June 2026); 26 CFR 46.4376-1; 26 CFR 46.4377-1. General information, not tax advice. Confirm how the rules apply to you with a qualified advisor or the IRS.
