The Cadillac Tax is one of a limited number of Affordable Care Act provisions yet to be implemented. Slated for adoption in 2018, the 40% nondeductible excise tax would be imposed on annual health insurance premiums that exceed $10,200 for individual coverage and $27,500 for family. The amounts, for both insured and self-funded plans, will be indexed for inflation after 2018.
As drafted, premium totals would include amounts contributed to Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs), which have gained in popularity over the past decade.
Opponents of the tax estimate as many as 26% of employers could face the tax in the first year. As health insurance inflation rises, projections are that 40% of plans would be affected within 10 years.
Responsibility for assessing the tax rests with the plan sponsor and would be cumbersome to calculate for each individual employee.
Additionally, the tax is assessed against the coverage provider, who could be an insurer as well as an employer of a self-funded plan. Critics point out that assessing and paying the tax only adds to the increasing burden of ACA administration. Both labor and business groups are mounting efforts to repeal the tax.
The IRS is accepting public comments through October 1, 2015. Bukaty Companies will provide updates as more is known.