Pension & Benefits News Looming ‘Cadillac’ tax is creating uncertainty for employer plans
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Wednesday, March 6, 2019

Looming ‘Cadillac’ tax is creating uncertainty for employer plans

By Pension and Benefits Editorial Staff

In a letter to Reps. Joe Courtney (D-Conn) and Mike Kelly (R-Pa), the Partnership for Employer-Sponsored Coverage, an advocacy alliance group, expressed strong support for the Middle Class Health Benefits Tax Repeal Act (H.R. 748). Introduced in January 2019, H.R. 748 is a bipartisan bill that would repeal the excise tax on high-cost health plans, otherwise known as the “Cadillac tax.”

The Patient Protection and Affordable Care Act (ACA) requires plan sponsors and insurers to pay a 40 percent excise tax on the excess cost of employer-sponsored health coverage for employees—amounts over $11,100 for employee-only and $29,750 for family coverage, adjusted for inflation annually. The Cadillac tax has been delayed several times, most recently to 2022.

According to the Partnership for Employer-Sponsored Coverage, the Cadillac tax “would force employers to cut or limit employee benefits. The tax is a blunt instrument that proponents envision will address the demand side of rising health costs. While dubbed the Cadillac tax because the provision was targeting ‘high cost’ employer-sponsored health coverage, it would impact the vast majority of employee benefits plans.”

The group continued, “While we appreciate prior delays of this tax, uncertainty remains in the employer health market as the U.S. Treasury Department begins to develop proposed rules for implementation. Employers make plan decisions well in advance of a coverage year beginning and looming proposed rules have a direct impact on plan decisions that are being made now for the next several coverage years. A full repeal of the Cadillac tax is extremely timely, and H.R. 748 will bring certainty to millions insured under an employer plan.”

SOURCE: http://www.hrpolicy.org/downloads/2019/P4ESC%20House%20Caddy%20Tax%20Ltr.pdf

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