In the time since we published an article on the Cadillac Tax in November of 2017, the Cadillac Tax has been delayed again. This time, as part of the spending bill signed January 22, 2018, the Cadillac Tax has been delayed until 2022.
The Cadillac Tax imposes a 40% excise tax on the portion of an employer’s group health plan costs that exceed certain thresholds. The basic annual thresholds are $10,200 for single coverage and $27,500 for family coverage; these thresholds are subject to adjustment based on inflation, age, gender, and occupation. Unfortunately, the IRS has not published guidance yet to help employers determine how the adjustments to the threshold are calculated. So, it is difficult if not impossible at this time for employers to precisely calculate their exposure to the Cadillac Tax.
However, many employer health plans are expected to reach the thresholds and trigger the tax based solely on the major medical plan premiums, particularly when you consider related costs like health reimbursement arrangements (HRAs), employer health savings account (HSA) contributions, health flexible spending accounts (Health FSAs) and potentially even on-site clinics.
Back in November we described three potential approaches for addressing the looming Cadillac Tax, summarized below:
As a practical matter, since the Cadillac Tax is now four years off (instead of two) and could be even further delayed, many employers may feel it’s too soon to make changes in anticipation of the Cadillac Tax and may choose keep a steady course for now.
For more information about the Cadillac Tax or other employee benefit issues, contact us.
Sarah provides employer-focused guidance on human resource matters. With an emphasis on employee benefits and the Affordable Care Act, she distils the complexity of employment laws into understandable action items that meet a client’s business goals.
Sarah provides employer-focused guidance on human resource matters. With an emphasis on employee benefits and the Affordable Care Act, she distils the complexity of employment laws into understandable action items that meet a client’s business goals. During previous private practice experience, Sarah handled numerous complex benefit matters, including the transition of benefit plans in large corporate acquisitions, de-risking solutions in pension plans, contested health plan claims, DOL and IRS audits and the implementation of ACA-compliant health plan solutions. Sarah graduated from University of Wisconsin Law School, with a Bachelor of Arts degree from Grinnell College.
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