Cadillac Tax Delayed for Two Years, Proposed Fiduciary Rule Untouched

cadillac tax

Opponents of the Affordable Care Act excise tax on higher-cost health plans got some welcome news in the massive year-end spending package that funds the government through 2016, but the same could not be said for those opposing the Labor Department’s fiduciary rule. Their goal of blocking this rule will now need separate legislation to be realized.

The funding bill signed by President Obama on Dec. 18 (H.R. 2029) delays for two years the ACA’s excise or “Cadillac” tax, which would place a 40 percent levy on plans exceeding $10,200 for individual coverage and $27,500 for family coverage. It was originally to take effect in 2018 but now is postponed until 2020.

The combined $1.1 trillion omnibus appropriations and $680 billion tax extenders package passed the Senate on Dec. 18 by a 65-33 vote.  The House easily passed the tax extenders portion of the bill—which includes several employee-benefits- and retirement-savings-related provisions—on Dec. 17.

The administration has opposed delaying the Cadillac tax, but Obama said he would sign the bill because of other policy victories won by Democrats in negotiations over the legislation—namely, the lack of Republican policy riders, including one that would have blocked the Labor Department's fiduciary rule that failed to make the final cut.

The spending bill also contains a moratorium on two taxes used to pay for the ACA: the medical device tax and the health insurance tax. The 2.3 percent excise tax on medical devices, which took effect in 2013, will be frozen for two years. The health insurance tax, which took effect in 2014 and has been opposed by the insurance industry and small-business groups, will be suspended for one year.

However, at the same time, House lawmakers from both parties didn’t give up on blocking the fiduciary rule, and unveiled legislation that includes mechanisms to end the fiduciary rule while aiming to address the conflicts of interest in the provision of investment advice.

The bills, rolled out Dec. 18, lay out a best-interest standard for financial advisers and state that those who breach the standard are subject to liability under the Employee Retirement Income Security Act and the tax code. The Affordable Retirement Advice Protection Act, led by Phil Roe (R-Tenn.), would amend ERISA, and the Strengthening Access to Valuable Education and Retirement Support Act of 2015, or SAVERS Act, led by Peter Roskam (R-Ill.), would amend the tax code. The bills are based on best-interest principles that three of the lawmakers involved in the new legislation touted in November (See related story, House Bills Would Set ‘Best Interest' Fiduciary Standard).

See related story, Cadillac Tax Delay Enacted as Obama Signs Spending Bill.

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