The IRS has issued its second notice regarding the upcoming implementation of the Patient Protection and Affordable Care Act’s (ACA) excise tax on high cost employer-sponsored health coverage, also known as the “Cadillac tax.” Beginning in 2018, plans that provide coverage that exceeds a threshold will owe the tax. The threshold generally will be $10,200 for single benefits and $27,500 for benefits provided to an employee, retiree or member of a bargaining unit, and dependents. The tax is 40 percent of the value of coverage provided over that threshold level.
The IRS has begun the process of writing regulations that will provide details on how this tax will operate. On February 23, 2015, the IRS issued Notice 2015-16, which provides some information on the types of benefits that will count toward the tax.
On July 30, 2015, the agency released Notice 2015-52, which addresses IRS thoughts on: (1) the definitions of applicable coverage; (2) the determination of the cost of applicable coverage; and (3) the application of the dollar limit on the cost of applicable coverage to determine any excess benefit subject to the excise tax. The IRS is seeking public comment on all of these issues.
The public comments on the two Notices will be the final steps the agency takes prior to drafting and releasing the proposed regulations. There is currently no target date set for those regulations.
UBA’s free resource, “IRS Issues Second Notice to Assist in Developing Cadillac Tax Regulations” details the issues on which the IRS is seeking public comment, including:
- Who is liable
- Controlled groups
- Tax calculation
- Exclusion amounts attributable to the excise tax
- HSAs, Archer MSAs, FSAs, and HRAs
- Cost of coverage under FSAs with employer flex credits
- Inclusions of self-insured coverage includible in income
- Age and gender adjustments
- Notice requirements
- Payment forms