‘Cadillac’ tax delayed: What it means for HR pros
Employers got an early Christmas present when President Obama signed a budget bill that delayed the implementation of the Affordable Care Act’s tax on high-value or “Cadillac” health plans.
How long is the delay? The 40% excise tax on high-value health plans (individual plans with premiums that exceed $10,200 and family plans with premiums exceeding $27,500) is now slated to kick in Jan. 1, 2020. It was originally scheduled to kick in two years earlier — Jan. 1, 2018.
Did the bill change the tax? Yes. The tax will now be deductible. So any amounts employers/plan sponsors end up paying toward the tax will be tax-deductible expenses. Also, the budget bill, which will fund the government through fiscal year 2016, calls for the U.S. comptroller general and the National Association of Insurance Commissioners to study whether the ACA uses “suitable” age and gender benchmarks to determine the “Cadillac” tax thresholds. So more changes could be on the way.
Did the bill alter the ACA in any other ways? Yes. It did so in two ways:
- It suspends the tax on medical devices for two years. The ACA requires medical device manufacturers to pay a 2.3% excise tax on all medical devices they sell. It took effect in 2013. The budget bill suspends the tax for two years, so it’ll kick back in on Jan. 1, 2018.
- It imposes a moratorium for one year on the collection of the ACA’s annual health insurance provider fee, which took effect in 2014. The fee will kick back in Jan. 1, 2017.
Did the bill push the “Cadillac” tax closer to death? Yes. For a while now, the Obama administration has been adamant that it would oppose or veto any legislation that would delay, weaken or kill the “Cadillac” tax. So what changed? Legislation to repeal the tax has been getting overwhelming support from both sides of the aisle in Congress. That, combined with pressure to get a budget deal passed by year-end — a deal Republicans insisted include some alteration of the tax — forced President Obama’s hand to delay the tax. The delay now gives opponents of the tax more time to either alter the tax or get it repealed altogether. Its fate will now will likely be left up to the next president and Congress.
