Cadillac Tax Guidance Will Address Variety of Health Plan Structures, Official Says

The Affordable Care Act's excise tax on high-cost health plans is prompting the Internal Revenue Service and Treasury Department to figure out how to fit new health coverage structures into a statute that only provides for self-only and non-self-only coverage, a government official said.

“Many, many plans today do not have self-only and family. What they have is self-only, and then they have self-plus one, self-plus two, self-plus three,” and so on and “all of those will fit under non-self-only, so how they fit under that, that's the question,” Kevin Knopf, senior technical reviewer, Internal Revenue Service Office of Chief Counsel, Tax Exempt and Government Entities, said March 6.

There's an “added wrinkle” if “your primary coverage is self-only and then you have” a flexible spending arrangement “on top of that, that's available to whole family and then you have” a health reimbursement arrangement “that's also available to the whole family. So do you look at this as non-self-only, do you look at self-only, do you split them up into two?” Knopf said, who was speaking during a session of the Federal Bar Association's 2015 Tax Law Conference

On Feb. 23, the IRS and Treasury issued the first official piece of guidance on the excise tax under Section 4980I in Notice 2015-16 (42 BPR 425, 3/3/15), saying it is “intended to initiate and inform the process of developing regulatory guidance.”

Knopf said he thinks the regulations on the so-called Cadillac tax, which goes into effect in 2018, will end up looking at primary coverage to determine if it is considered self-only or non-self-only coverage for purposes of calculating the tax.

Excerpted from a story that ran in Pension & Benefits Daily (03/06/2014).

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