HR Compliance

‘Cadillac Tax’ Delayed to 2020

By

Robert Barclay

| Dec 23, 2015

Businesses likely to be impacted by the Affordable Care Act’s looming “Cadillac tax” were given temporary relief. On Dec. 18, President Barack Obama signed the Consolidated Appropriations Act into law, delaying the effective date by two years, thereby pushing the tax to 2020.

Many organizations already had taken steps to restructure their plans in order to avoid the original 2018 date. The Kaiser Family Foundation disclosed in a September report that 13 percent of large employers had made changes to their plans regarding cost-sharing requirements, while 8 percent adopted new plans altogether.

Research by the National Business Group indicated that nearly three-quarters of the businesses surveyed indicated their plans will trigger the tax in 2020, meaning businesses must still plan accordingly.

The Purpose of the Tax The so-called “Cadillac tax” targets health plans that provide workers the most generous level of benefits, with little cost-sharing for employees. The tax will impose a 40 percent excise tax on these high-cost insurance plans, priced at more than $10,200 for individuals and $27,500 for families.

The threshold was set to rise at the rate of inflation, not medical inflation, which is nearly double that of the cost of living inflation. It is not yet known if the threshold is expected to change, given the two-year delay. To read more about the tax, check out our blog: What You Need to Know about the ACA’s Cadillac Tax.

What’s Next? The ACA’s Cadillac tax is designed to help control the growth of health care spending by eliminating highly generous plans and curtailing excess usage. The excise tax also is intended to help offset the cost of subsides given to qualifying individuals enrolling in health insurance through the marketplace.

Members of Congress have conveyed a strong bipartisan desire to do away with the Cadillac tax, though it remains to be seen what will become of this portion of the ACA, especially with a new president taking over the reins in January 2017.

For now, plan on the tax taking effect in 2020, but know that anything could happen.

About the Author

Robert Barclay

Robert Barclay has been the Tax Research Team Lead at Paycom since 2012, and has been instrumental in such company projects as the development of its Affordable Care Act compliance product, implementation of geolocation services and redesign of Form W-2. He joined Paycom in 2011, bringing more than 20 years of experience with the capital markets consulting practices of Ernst & Young in Memphis, Tenn., and Birmingham, Ala.; and Causey Demgen & Moore in Denver, Colo. A native Oklahoman, Barclay is a graduate of Rhodes College in Memphis, where he played football as linebacker.

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