We’ve talked much on our blog about the impending “Cadillac Tax,” President Obama’s 40 percent excise tax on employer health care coverage that exceeds specific annual limits. We’ve addressed what the tax entails, who might be affected, and what some businesses are doing to limit their exposure.
Now we’d like to update you on some recent changes and delays that may offer some relief to business owners. The tax has many opponents who hope to get it repealed before it goes into effect, on its new start date. However, for the meantime, here’s what you need to know about the recent (and proposed) updates to the Cadillac Tax.
- It’s been pushed back two years. Originally set to begin on January 1, 2018, the tax will now go into effect January 1, 2020, at the earliest. This change is the result of President Obama’s signing of the Consolidated Appropriations Act of 2016, Congress’s $1.8 trillion omnibus spending deal. Between now and then, the National Association of Insurance Commissioners will examine whether the tax thresholds set by the ACA should be adjusted based on factors like gender or age.
- It’s now tax deductible. Another change implemented by the Act is that employers who are hit with the tax can write it off as a deduction, which will help lessen its impact for some business owners.
- Dates for reporting requirements have been extended. Per IRS Notice 2016-4, the due dates for the 2015 ACA information reporting requirements (those furnished to individuals and filed with the IRS) under Code Sections 6055 and 6056 have been extended. The new dates are March 31, 2016 (instead of February 1), for providing individuals with Forms 1095-B and -C. The dates for submitting Forms 1094-B and -C and 1095-B and -C have been pushed back to June 30 2016 (instead of March 31), if filing electronically, or to May 31, 2016 (instead of February 29), if not.
- Obama may consider altering the thresholds in some areas. A senior White House adviser recently announced that the President may consider tailoring the plan’s thresholds to reflect regional differences, particularly in areas where healthcare costs are the highest. Any changes to the plan will be announced when he releases his 2017 budget in the coming weeks.
As always, even though delays have been announced and changes may be imminent, it’s still important for employers to continue preparation for the reporting requirements. Failure to report will subject business owners to penalties, although the IRS has indicated they will take a number of factors into consideration when deciding whether to abate any penalties where there’s reasonable cause.