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Cadillac Tax Deferred With Implications for Insurance Companies, Employers and Employees

President Obama has signed the omnibus legislation that includes the Consolidated Appropriations Act for 2016 and a tax extenders package.

Within the legislation is language that significantly impacts provisions of the Patient Protection and Affordable Care Act (ACA), largely through delays of upcoming taxes.

The most significant delay contained in the omnibus bill is a two-year delay on the "Cadillac tax" or the 40 percent excise tax on high-cost health insurance.

The Cadillac tax was set to go into effect Jan. 1, 2018 but is now delayed until Jan. 1, 2020. If it goes into effect in 2020, it will now be tax deductible for employers. Previously the tax was non-deductible from federal income tax.

The excise tax is levied on each component of a high cost insurance plan — including health, HSA and dental — based on its share of the total aggregate value.

Insurers will pay the tax on insured plans, employers will pay the tax on plans under which the employer makes health savings account or medical savings account contributions and the entity or person administering the plan will pay the tax on self-insured plans.

Beneflex Insurance Services is a full service employee benefits advisory firm with offices in Santa Barbara and Thousand Oaks, Calif. It specializes in helping employers control costs via prudent plan design and implementation of employee benefit plans with proprietary and mostly unheard of strategies.  

Beneflex makes employer plans work for both employer and employees and their covered family members.

— Michelle Meissner is a compliance specialist with Beneflex Insurance Services.

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