ACA UPDATE: Cadillac Tax Delayed Until 2020

Compliance, Employee Benefits

Implementation Delayed Two Years

Both houses of Congress and President Obama signed a bipartisan omnibus spending bill entitled the “Consolidated Appropriations Act, 2016” into law on December 18, 2015.

The spending bill includes a change which has an impact on the Affordable Care Act (ACA); implementation of the Cadillac Tax, which is an excise on high-cost health plans, has been delayed until 2020.

What this change means for you

This delay creates a greater window for employers prior to enactment of the Cadillac Tax. This moratorium postpones the excise tax on high-cost employer-sponsored health coverage until the 2020 tax year. The tax itself would only apply to amounts greater than the scheduled limits and would be applied to 40% of the excess benefit amount. The scheduled amounts are currently:

  • Individual coverage: $10,200
  • All other coverage: $27,500

These limits were written into law in 2010, and further changes to the excise tax are entirely possible from future legislation and/or regulatory action.

What this change doesn’t mean

With the Cadillac Tax originally set to begin in 2018, is important to discern that the two year delay is not a termination of the excise tax. The tax is still scheduled for implementation in the 2020 fiscal tax year.

Since there is no further clarification of how the tax will be implemented, there is still a lot of uncertainty on the specifics of what it will mean for employers. At this point, any source that claims certainty on how the tax will be implemented, whether it will or will not be implemented or at what levels the tax would be implemented, are not credible.

Key Takeaway

It would be prudent to understand what the Cadillac Tax is, stay mindful of your health insurance costs and be aware of federal guidance/legislation that may alter the tax. Moving forward, we encourage you to continue to work with your insurance advisors to identify ways to manage your health insurance costs. M3 will keep you informed of changes to the Cadillac Tax or any other component of the Affordable Care Act which could affect your organization.

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