Tuesday, March 3, 2015

Cadillac Tax Update

The Treasury Department and Internal Revenue Service recently released the Administration’s initial guidance on the “Cadillac plan tax,” a forty percent non-deductible excise tax on certain health care plans created by the Affordable Care Act beginning in 2018.

The non-deductible excise tax, codified in Section 4980I of the Internal Revenue Code, applies to the cost of “applicable employer-sponsored coverage” above an annually-adjusted threshold. The tax is intended to discourage consumers with especially generous health benefits from overusing care simply because they can do so. The threshold operates in much the same way as the Alternative Minimum Tax and over time will affect more and more middle class workers. 

Treasury and IRS are seeking comment (Notice 2015-16), regarding a special allowance for certain occupational categories. They are considering, for example, excluding dental and vision coverage from the value of a health plan. They are also seeking comment on whether the tax shouldn't apply to certain so-called safe harbors for folks with especially high-risk jobs or with age and gender characteristics that set them apart. 

Comments on this proposal are due May 15, though Treasury and IRS said they anticipate another round of feedback on a subsequent proposal that will address further subjects - including how the tax itself is calculated and assessed. The full notice: http://1.usa.gov/1vtEs1s

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