QUESTION: What is the status of the “Cadillac” tax?
ANSWER: When the Affordable Care Act (ACA) went into effect in 2010, it included the High-Cost Plan Tax (HCPT), commonly referred to as the “Cadillac” Tax. The Cadillac Tax has twice been delayed and is currently scheduled to take effect on January 1, 2022.
The tax is a 40% tax based on the value of health benefits in excess of a predetermined threshold, originally set at $10,200 for single coverage and $27,500 for family coverage (but amounts will increase by 2022 due to inflation). The Cadillac tax applies to employer and employee contributions to premiums, and contributions to health savings accounts, health reimbursement arrangements, and flexible spending accounts.
The Kaiser Family Foundation estimates that in 2022, 21% of employers offering health benefits will have at least one plan whose premium and account contributions would exceed the threshold.
The implementation of the 2022 date remains in discussion. On July 17, 2019, the Middle Class Health Benefits Tax Repeal Act of 2019 (HR 748) passed the House, although no further action is scheduled. You should continue to monitor any legislative action as the tax may continue to be delayed or even repealed altogether.