IRS seeks feedback on ‘Cadillac Tax’ exceptions

On Feb. 23, the IRS issued a notice seeking comments as it prepares to develop regulations for the Affordable Care Act’s socalled “Cadillac tax” that is set to take effect in 2018, including on potential “excepted benefit[s]” that would not count toward the tax, Modern Healthcare reports.

Background 

Under the ACA, most employer-sponsored health plans with annual premiums of more than $10,200 for individuals or $27,500 for families would pay a 40% excise tax on the portion of the premiums that exceeds those thresholds. The tax is set to take effect on Jan. 1, 2018. 

According to Modern Healthcare, the tax was designed to help pay for the ACA and to help reduce health spending. However, some stakeholders, including unions, are opposed to the tax and say it will result in more health care costs being shifted from employers to employees and result in less generous collectively bargained benefits.

Several U.S. companies already have taken steps to scale back generous coverage plans in advance of the tax taking effect, Modern Healthcare reports.

Notice Details

In the notice, IRS said that vision and dental benefits might not count toward the tax. In addition, the agency proposed that employee assistance programs that provide counseling, such as for substance use disorders or family issues, also count as an excepted benefit. 

In addition, IRS raised the possibility of adjusting the dollar-limit thresholds of the tax for plans that have “employee populations with age and gender characteristics that are different from those of the national workforce” (Herman, Modern Healthcare, 2/24). 

IRS also noted that the ACA allows for the dollar-limit thresholds to be raised for employers with a majority of employees who are engaged in “[h]igh-risk professions” (IRS notice, 2/24). The department detailed several specific examples, including con struction workers, firefighters, law enforcement officers, miners and individuals who “repair or install electrical or telecommunication lines.” IRS is seeking comments on whether additional guidance on “high-risk professions” is needed.

Next Steps

IRS is seeking comments on the notice through May 15. In addition, IRS is expected to soon release an additional notice regarding how the tax should be assessed and calculated (Modern Healthcare, 2/24).

NACo opposes excise tax on health insurance benefits for county employees 

A policy resolution, adopted at the 2014 Annual Conference in New Orleans, states: “The National Association of Counties (NACo) opposes the taxation of health insurance benefits to county employees through the application of the ACA excise tax on health insurance benefits for county employees, the capping of the tax exclusion for employer-based defined contributions made by counties and any new taxes which would apply to the health benefits that counties provide to their employees.”

The association has closely focused on the tax, also known as the “Cadillac tax,” and will respond to the IRS’ notice requesting comments. NACo has also analyzed the impact of the tax on counties and presented its findings in a number of formats.

In December, NACo released a 12-page publication on the tax’s impact on county governments. The publication, Excise Tax on High-Cost Employer-Sponsored Health Coverage: What Counties Need to Know, can be downloaded at no cost from NACo’s website at www. naco.org/publications. It also produced a webinar, The Excise Tax on High-Cost Health Insurance and Your County, and a conference workshop, Health Policy Outlook: What Lies Ahead for Counties as Employers. Recordings of both the webinar and workshop can be found on NACo’s website.

For more information contact: Mike Belarmino, associate legislative director for tax and finance, mbelarmino@naco.org, or Brian Bowden, associate legislative director for health, bbowden@naco.org.