Compliance January 23, 2018

Cadillac Tax Delayed Again

The effective date of the excise tax on high-cost health plans is now in 2022.

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The bill that ended the government shutdown and provided funding until February 8 also included a two-year delay in the Affordable Care Act’s (ACA) excise tax on high-cost health plans, known as the Cadillac tax.

The Consolidated Appropriations Act, passed by Congress in 2016, included a two-year delay of the 40% excise tax, making it effective in 2020. So, the new bill pushes the effective date to 2022.

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The action drew immediate responses from industry groups. “We applaud Congress for approving a critically important two-year delay of the 40 percent ‘Cadillac Tax’ on employer-sponsored health coverage as part of the government funding bill,” American Benefits Council President James A. Klein said. “Because companies typically make health plan decisions 18 to 24 months in advance, employers were reluctantly considering curtailing benefits or increasing workers’ out-of-pocket costs to meet the prior 2020 deadline. Today’s welcome reprieve allows employers to maintain the health coverage working families need and want while we continue to work to address this tax permanently.”

He added that: “The Council continues to believe that full repeal is the only real solution to this onerous tax on working families.”

Annette Guarisco Fildes, president and CEO, The ERISA Industry Committee (ERIC) said, “Today marks a victory for ERIC. Nine years ago, ERIC began its fight against the 40 percent ‘Cadillac’ excise tax on employer-sponsored health insurance, and strongly supported the two-year delay contained in the Continuing Resolution. But, while ERIC celebrates today’s win, our work is far from over. We will continue to fight for the full repeal of the Cadillac tax, because without it, employers will still be forced to ready themselves for its eventual implementation. To prepare, they will start scaling back benefits and increasingly shift rising health care costs to employees. This is a game where no one wins and it must be permanently stopped.”

The bill also halts the ACA’s 2.3% medical device tax for 2018 and 2019 and suspends the health insurance tax (HIT) for 2019.

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