tax is referred to by some as the “Cadillac Tax.” Below are responses to recent
questions received regarding the Excise Tax.
When is the Excise
Excise Tax is effective beginning for taxable years beginning in 2018. It is likely that any tax owed based on the
2018 tax year will be payable in 2019.
Is there any agency
guidance on the Excise Tax?
Treasury and the Internal Revenue Service (IRS) have not yet issued any
guidance on the Excise Tax.
Are all types of
health coverage taken into account in determining whether the Excise Tax
Excise Tax applies to “applicable employer-sponsored coverage” of employees. Applicable
employer-sponsored coverage generally means coverage under any group health
plan made available to the employee by an employer that “is excludable from the
employee’s gross income under Code Section 106, or would be so excludable if it
were employer-provided coverage (within the meaning of Code Section 106).” Thus,
both the employer and employee-paid portions of premiums are taken into
account. The Excise Tax applies to insured and self-funded plans, as well as
governmental plans and coverage providing health insurance to self-employed
Are any types of
coverage exempt from the Excise Tax?
following types of coverage are excluded from the definition of applicable
employer-sponsored coverage under the statutory language:
for long-term care.
(whether through insurance or otherwise) described in Code section 9832(c)(1)
(other than coverage for on-site medical clinics):
only for accident, or disability income insurance, or any combination thereof;
issued as a supplement to liability insurance;
insurance, including general liability insurance and automobile liability
compensation or similar insurance;
medical payment insurance;
similar insurance coverage, specified in regulations, under which benefits for
medical care are secondary or incidental to other insurance benefits.
coverage under a separate policy, certificate, or contract of insurance which
provides benefits substantially all of which are for treatment of the mouth
(including any organ or structure within the mouth) or for treatment of the
Coverage for a
specified disease or illness, or for hospital indemnity or other fixed
indemnity insurance, as described in Code section 9832(c)(3), if paid on an
after-tax basis (or, in the case of a self-employed individual, on a not
deductible basis) and offered as an independent, non-coordinated benefit.