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Cadillac Tax delayed again … but not eliminated

January 24, 2018

By Scott Lyon, Senior Vice President

What do the Cadillac Tax and the effort to keep the federal government funded have to do with each other?  If you thought, nothing, you would be right and if you said everything, you would be right.  

On January 22, Congress passed and President Trump signed into law a two-year delay – until January 2022 – of the Affordable Care Act’s Cadillac Tax – a 40 percent excise tax on high-value health care plans. The provision was part of the measure to restore funding to the federal government through February 8. 

But, that is not all. The bill extends the Children’s Health Insurance Program (CHIP) for six additional years.  It also delays the implementation of the Medical Devise Tax until 2020, which is a 2.3 percent tax on the sale of certain medical devices.  

While this is a welcome delay, it does not fix the problem or eliminate the Cadillac Tax.  Remember, this is only a delay.  The Cadillac Tax, now scheduled to go into effect in January of 2022, still incorporates the premiums outlined when the Affordable Care Act was signed into law in 2010.  These amounts are:

  • $10,200 for individual coverage 
  • $27,500 for family coverage 

Last, the above limits are indexed to the CPI and may be increased for inflation. While the tax was originally not deductible as a business expense, a December 2015 change made the tax deductible for employers who pay it.  In fully insured plans, the insurance carriers are responsible for paying the tax, which would most likely be passed on in the form of higher premiums.  For self-funded plans, the employer plan sponsor is responsible for payment.

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