How to Calculate Average Covered Lives for the PCORI Fee
1. Actual count method
Add up the number of lives covered on each day of the plan year, then divide by the number of days in the year. It's the most precise method — and the most labor-intensive, since it needs daily enrollment data.
2. Snapshot method
Count covered lives on a single day in each quarter (or more often), then average those counts. The chosen dates must be consistent across quarters — each within three days of the corresponding date in the first quarter. It's the practical favorite for HR teams that already run monthly enrollment reports.
There's also a snapshot factor shortcut: instead of counting every dependent, count employees with self-only coverage, plus 2.35 × employees with other-than-self-only (family) coverage.
3. Member months method (insurers only)
Available only to issuers of health insurance policies. Take the total member months for the policy year (from the NAIC supplemental health care exhibit) and divide by 12. Self-insured plan sponsors cannot use this method.
4. Form 5500 method (self-insured only)
The simplest option if you already file Form 5500 — it reuses the participant counts you report there. How you combine them depends on the coverage you offer:
| Plan offers | Covered lives = |
|---|---|
| Self-only coverage only | (participants at start + end) ÷ 2 |
| Self-only and family coverage | participants at start + end (no dividing) |
The "no dividing" rule for family plans is intentional: Form 5500 participant counts don't include dependents, so adding the start and end counts approximates them.
Special rule for HRAs and FSAs
For an HRA (or other account-based plan), you can treat each participating employee as one covered life — no need to count spouses or dependents. That keeps HRA PCORI math trivial. See our PCORI fee for HRAs & FSAs guide for which arrangements owe the fee in the first place.
FAQ
What are the methods for counting covered lives for the PCORI fee?▼
The IRS allows the actual count method, the snapshot method, the member months method (insurers only), and the Form 5500 method (self-insured plans only). You must use one method consistently for the entire plan year, but you may switch methods from one year to the next.
How does the Form 5500 method work for a self-insured plan?▼
For a plan offering only self-only coverage, average the participants reported at the beginning and end of the plan year. For a plan that also offers family/other-than-self-only coverage, add the beginning and end participant counts together (do not divide by two) — that sum approximates the dependents not separately counted on Form 5500.
How do I count covered lives for an HRA?▼
For an HRA (or other account-based plan), you may treat each participating employee as a single covered life — you do not have to count spouses and dependents separately. This special counting rule keeps HRA PCORI calculations simple.
Estimate your PCORI fee in seconds
Plug your covered-lives count into the free calculator, or let EasyFile720 apply the right rate and file IRS No. 133 for you.
This article reflects the Instructions for Form 720 (Rev. June 2026) and the PCORI fee regulations under IRC §§ 4375–4377. General information, not tax advice. Confirm the counting method appropriate to your plan with a qualified advisor.
