The two-year delay, backed by SHRM, was included in funding bill
Jan 23, 2018 - SHRM
The Cadillac tax isn't dead but it will stay suspended a while longer.
On Jan. 22, Congress passed and President Donald Trump signed into law a two-year delay on the Affordable Care Act's 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 Feb. 8, ending a partial government shutdown.
Both political parties supported the provision to postpone the so-called Cadillac tax from taking effect until 2022, instead of in 2020—as did the Society for Human Resource Management (SHRM).
The stopgap funding bill also amends other tax provisions that were part of
the Affordable Care Act, such delaying the medical device tax—a 2.3 percent tax
on the sale of certain devices—until 2020. In addition, the bill would extend
the Children's Health Insurance Program (CHIP) for six additional years.
In December 2015, Congress passed and President Barack Obama signed an
initial two-year delay of the Cadillac tax, changing the effective date from
2018 to 2020.
"SHRM has long advocated for full repeal of the excise tax and applauds the
new two-year delay," said Chatrane Birbal, senior advisor of government
relations at SHRM. The postponement will provide much needed relief to
employers and employees and "is an acknowledgement by Congress of the
importance of employer-sponsored health insurance, which provides benefits to
over 178 million Americans and their families."
Looking ahead, SHRM will continue to support and encourage Congress to fully
repeal the excise tax, Birbal said. "Repealing this tax has strong bipartisan,
bicameral support," she noted. Proposals to fully repeal the tax have been
sponsored by Senators Dean Heller, R-Nev., and Martin Heinrich, D-N.M., and by
Representatives Mike Kelly, R-Pa., and Joe Courtney, D-Conn.
While the excise tax is only intended to target high-value plans, "modest
plans will also be impacted," wrote Johnny C. Taylor, Jr., SHRM-SCP, president
and CEO of SHRM, in a Jan. 19 letter to Senate Majority Leader Mitch
McConnell (R-Ky.) and Minority Leader Charles Schumer (D-N.Y.).
Taylor wrote, "This means millions of Americans and their families could face
higher co-pays and deductibles, causing some to decline employer-provided health
care," if the tax were to take effect.
With the new delay, the excise tax will be imposed beginning in 2022 on the cost of health plan coverage that is more than these pre-determined annual limits:
These limits are indexed to the Consumer Price Index and may be increased for inflation. While the tax was originally not deductible as a business expense, the December 2015 changes make it tax deductible for employers who pay it.
The provider of health coverage must pay the excise tax:
Several employer groups also cheered the postponement but, like SHRM, look forward to achieving full repeal of the levy.
"We applaud efforts to delay the Cadillac tax that is driving up health care costs for millions of Americans," said James A. Klein, president of the American Benefits Council in Washington, D.C., a trade association for large plan sponsors. "We will continue our efforts to fully repeal this onerous tax that forces employers to reluctantly cut benefits and increase out-of-pocket costs for employees in an attempt to avoid it. We appreciate Congress including this two-year delay as a down payment for full repeal."
"Employer plans are driving innovations that improve the health of employees
and their families and that provide more affordable, higher quality health care
for all," said Steve Wojcik, vice president of public policy at the National
Business Group on Health in Washington, D.C., an employers group. "There is
widespread, bipartisan support to repeal this tax, which if it takes effect,
would drive up costs for employers and employees alike."