Employers can use the two-year delay of the Affordable Care Act’s “Cadillac” tax to plan for its implementation or wait to see if repeal momentum pans out, practitioners said.
The funding bill signed by President Obama on Dec. 18 (Pub. L. No. 114-113) delays implementation of the 40 percent tax on plans exceeding $10,200 for individual coverage and $27,500 for family coverage until 2020.
“Employers now have more time to plan and strategize on how to lower their cost of health coverage in order to avoid hitting or exceeding the Cadillac tax threshold,” Amy Gordon, partner with McDermott Will & Emery in Chicago, told Bloomberg BNA.
Gordon has seen clients prepare for the Cadillac tax by adopting or enhancing their wellness programs, including embracing telemedicine as an offering or moving their medical coverage to a high-deductible plan with a health savings account. “We have other employer clients that are taking a hard and fast look at their health plan’s deductibles, co-pays and covered benefits to assess if there are cost savings to be achieved,” Gordon said.
But with the delay of the Cadillac Tax, employers may be able to use the extra time to comply with other parts of the ACA. “I think that employers shouldn’t rush to do anything right now and direct their human resources energies toward the ACA filings, which are due in the next couple of months. That is where they should be focusing their attention,” Patricia A. Moran, of counsel with Mintz Levin in Boston, told Blomberg BNA.
“I think the Cadillac tax should be put on the back burner for two reasons,” Moran said. “First, because we just don’t have a lot of guidance and until there is more clarity there is not a whole lot to be done and second, because it’s an overwhelmingly unpopular piece of the Affordable Care Act,” Moran said.
“Employers don’t like it, employees don’t like it. It’s so unpopular to so many different groups that if you’re going to put your money on anything being repealed from the ACA this is probably it,” Moran said.
Rachel Leiser Levy, principal at Groom Law Group in Washington, told Bloomberg BNA that “employers should make sure to be on the lookout for agency guidance and should stay tuned to see whether the two-year delay eventually leads to full repeal.”
“It is unclear whether Treasury and IRS will issue guidance now or will wait for a new administration,” Levy said. “In the event that proposed regulations are issued, employers should make sure to remain engaged in the regulatory process in order to ensure that their concerns are properly addressed.”
“In the meantime, the delay does not change the indexing rules that apply to the dollar thresholds, so the same thresholds that would have applied absent repeal will continue to apply in 2020. Employers should be actively considering plan costs during the delay and where plans may end up in 2020,” Levy said.
For more information see related stories, Cadillac Tax Delayed for Two Years, Proposed Fiduciary Rule Untouched and Cadillac Tax Delay Enacted as Obama Signs Spending Bill.
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