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ACA Cadillac tax delayed two years

published in McAfee & Taft EmployerLINC Alert | December 21, 2015

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By Brandon P. Long

Last Friday, Congress voted to approve an omnibus spending deal to fund the federal government. This spending package includes a two-year delay – from 2018 to 2020 – of the so-called “Cadillac tax,” which was enacted as part of the Affordable Care Act. The bill was signed into law by President Obama later that day.

This is huge news for employers. As you may recall, the Cadillac tax is a 40% nondeductible excise tax on high-cost health coverage that applies to the cost of employer-sponsored health coverage exceeding certain limits: $10,200 for self-only coverage and $27,500 for family coverage for 2018 (until now). The Cadillac tax applies to the amount by which the monthly cost of an employee’s employer-sponsored health coverage exceeds the specified limits. The tax is imposed on employers, insurers and/or entities administering plan benefits. The tax is designed to raise revenue to offset the cost of other provisions of the ACA and to reduce the demand for high-cost coverage by making it more expensive.

Because of this delay, employers have a little more time to develop their strategies to avoid the tax. We strongly encourage you to take advantage of this time to be proactive in developing and implementing strategies that set a good trend to decrease the cost of coverage and avoid the tax when it becomes effective.

This alert has been provided for clients and friends of McAfee & Taft A Professional Corporation. It does not provide legal advice, and is not intended to create a lawyer-client relationship. Readers should not act upon information in this alert without seeking professional counsel.