Wondering what all the buzz is about regarding the “Cadillac Tax”? Will the Cadillac Tax affect you? We break it down for you right here:
What is the Cadillac Tax?
The Cadillac Tax will be levied on employers who offer high-cost health benefits to their employees. The main purpose behind the Cadillac Tax is to raise revenue in order to help finance coverage under the Patient Protection and Affordable Care Act. This 40% non-deductible tax will be imposed on the difference between the total cost of health benefits for each employee and the set thresholds in a given year. Although final regulations have not yet been released, the Cadillac tax is set to take effect in 2018.
Will the “Cadillac Tax” affect me?
The current benefit thresholds in place are $10,200 for individuals and $27,500 for families. Employers offering plans exceeding these thresholds will be subject to the tax. Types of benefits included in the calculation of the Cadillac Tax include both employer and employee contributions for health insurance and prescription drug coverage, and also include contributions to health savings and flexible spending accounts, wellness programs, on-site medical clinics, among others. Types of coverage not included are workers’ compensation, liability insurance and long term care.
The 2018 tax year may be a few years away, but proactive employers are already making the necessary changes to plans they offer in order to avoid the Cadillac Tax. The details that have been released are subject to change with the final regulations, but can be used as general guidelines in your health coverage and tax planning.
If you have questions regarding the Cadillac Tax or feel that you may fall into this category, contact us!