While many organizations have been focused on the Employer Reporting Requirements and “Pay or Play” rules under the Affordable Care Act (ACA) this year, there is another Health Care Reform provision that certainly requires attention.
For taxable years beginning in 2018, the ACA imposes a 40 percent excise tax on high-cost group health coverage. This tax, also known as the “Cadillac tax,” is intended to encourage companies to choose lower-cost health plans for their employees.
While the IRS is still formulating regulations around this tax, it’s important to understand how it may potentially impact your organization. Below is a brief, high-level overview regarding some key elements of this tax:
- What is the Fee and Duration of the Tax? Beginning in 2018, this will be a permanent annual tax. Employers that provide high-cost benefits through an employer-sponsored group health plan will be impacted.
- What is the Amount of the Tax? The provision taxes the amount of an employee’s “excess benefit,” which is the amount by which the monthly cost of an employee’s employer-sponsored health coverage exceeds the annual limitation. For 2018, the statutory dollar limits are $10,200 per employee for self-only coverage and $27,500 per employee for other-than-self-only coverage.
- Who is Responsible for Calculating and Paying the Tax? Employers will be responsible for calculating the Cadillac tax owed for each employee’s employer-sponsored coverage, as well as the share attributable to each coverage provider. The responsibility for paying the Cadillac tax falls on the “coverage provider.” Depending on the type of coverage, this can be the insurer, the employer or a third-party administrator.
We hope that you find this brief overview helpful. For a more in-depth look at the potential impact of the “Cadillac tax”, we invite you to attend our upcoming Health Care Reform and HR Compliance seminar on May 6th, 2015.
In addition, please send an email to info@CBGBenefits.com to request a copy of our detailed Legislative Brief on the topic of the Cadillac Tax.