The Cadillac Tax
One of the taxes levied by the Affordable Healthcare Act (or as others call it, Obama-care or Health Reform) will affect employers on January 1, 2018. This imposes a 40% excise tax on “healthcare” provided to employees that exceed specific dollar amounts annually.
This tax will apply to all employers, regardless of size, or whether they are offering fully insured or self-funded coverage. Data currently indicates that about 30% of all employers will be required to pay this tax in 2018, if current benefit levels are maintained. This will rise to 50% of employers by 2022, again, if current benefit levels are continued.
The Dividing Line
In 2018, employers who offer benefits costing more than $10,200 for single coverage and/or more than $27,500 for non-single coverage will be hit with this tax. These numbers are not yet set in stone, since there is a provision in the law that allows the IRS to adjust this figure the first year (2018). Thereafter, it will increase with the Cost of Living.
In addition, the levels an employer is subject to may be higher if any of the following apply. (However, the applicable
increases to the non-taxed thresholds have not yet been provided by the IRS.)
- The age/gender makeup of the group varies from national averages
- There are retirees covered under the plan
- Employees are in a high-risk occupation
- Employees are employed to install or repair electrical or telecommunication lines.
Who Calculates and Pays
Employers will be tasked with calculating the tax due. This
process has yet to be determined by the IRS….more to come.