The Internal Revenue Service issued Notice 2015-52 providing limited guidance on the “Cadillac Tax” under health care reform. The Affordable Care Act added a 40% excise tax on the value of health coverage that exceeds a set dollar limit.
The Notice provides guidance on select issues that have been outstanding on how to implement the Cadillac Tax. Specifically
- Who pays the tax. The insurer pays the tax for an insured plan and the employer pays the tax for an account plan such as an FSA or HRA. For other plans, the tax is paid by the “coverage provider.” The IRS proposes two approaches for determining who is the coverage provider. It could be the person responsible for performing daily administration of the plan or the person who has ultimate authority with respect to administration.
- Calculating the cost of applicable coverage. Since insurers who pay the Cadillac tax will pass the cost of the tax onto employers, the IRS recognizes that they should consider increases as not being included in the cost of coverage.
- How and when the tax will be paid. The Notice recognizes that the IRS will probably require payment after the end of the calendar year, regardless of plan year.
The new Notice provides limited practical guidance and will not be the end of the IRS’ discussion of the controversial tax. For a copy of Notice 2015-52, click here.
