The IRS has issued its second notice regarding the upcoming implementation of the ACA “Cadillac tax.” Beginning in 2018, plans that provide coverage that exceeds a specified premium threshold will owe the tax. The threshold generally will be $10,200 for single coverage and $27,500 for family coverage. The tax applies to coverage provided to an employee, retiree or member of a bargaining unit, and dependents. The tax is 40 percent of the value of coverage provided over that threshold level
The IRS began the process of clarifying how this tax will operate by issuing Notice 2015-16, in February 2015. This Notice provided some information on the types of benefits that will count toward the tax. A second notice, Notice 2015-52, was issued in July 2015. This second notice addresses a number of technical items, all of which are under discussion by the IRS/Treasury officials and upon which the IRS is seeking public comment. Vita is planning to submit important commentary regarding the nuances and difficulties that employers will face in calculating the Cadillac tax. It is our hope that the commentary Vita provides will allow regulators to see and understand some of the unnecessary complexities in the tax calculations and help them work to potentially simplify the process for all employers.
The IRS has not provided a time frame for the proposed regulations, and much will depend on politics in the national landscape. It is unlikely that further guidance will be issued prior to December 2015 (earliest possible) and it is more likely that would take significantly longer.
At this time, there is little definitive guidance on the implementation details of the tax. And generally, there is little in Notice 2015-52 that employers need to worry about digesting today. However, employers do need to start assessing and discussing the potential impact of the Cadillac tax on their employee benefit plans. 2018 is just around the corner and employers should be looking at modeling future cost scenarios to confirm future impact today.
For those interested in a few more details on the specific issues addressed in the Notice, Vita has provided a Readable Summary of IRS Notice 2015 along with this Vita Viewpoint.
Readable Summary of IRS Notice 2015-52
For those wanting more detail, CLICK HERE for a high level overview of the items addressed in Notice 2015-52. The intention of this summary is to provide the basic information in as readable a form as possible. Details that are yet to be hashed out by the regulators have been omitted for the sake of simplicity.