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By Kurt R. Anderson, Esq., Daniel V. Johns, Esq., Edward I. Leeds, Esq., and Brian M. Pinheiro, Esq.
Ballard Spahr LLP, Philadelphia, PA
The IRS has issued Notice 2015-52 addressing issues relating to future rules governing the calculation and payment of the so-called "Cadillac tax" under the Affordable Care Act. Beginning in 2018, the ACA will impose a 40% nondeductible excise tax on the value of group health coverage that exceeds a baseline amount of $10,200 for self-only coverage and $27,500 for family coverage (regardless of family size).
The new guidance supplements Notice 2015-16, which also described certain complicated issues and possible approaches that the IRS is considering as it prepares regulations interpreting and implementing the Cadillac tax. The new guidance discusses:
Notice 2015-52 reflects the complexity of the challenge faced by the IRS in implementing the Cadillac tax, and the potential challenges that lie ahead for both employers and coverage providers. Although actual guidance has not yet been issued, employers should begin now to think about ways to reduce their exposure to the Cadillac tax. Employers may need to keep in mind that the impact of the Cadillac tax is expected to grow over time. Even though the baseline dollar limits under the Cadillac tax are indexed for inflation, the indexing is not likely to keep pace with medical inflation.
As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.
For more information, in the Tax Management Portfolios, see Cowart, 389 T.M., Medical Plans — COBRA, HIPAA, HRAs, HSAs and Disability, and in Tax Practice Series, see ¶5920, Health & Disability Plans.
Copyright © 2015 by Ballard Spahr LLP.
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