Cadillac Tax Basics
Starting in 2018, a 40 percent excise tax will be applied on every dollar that is spent on benefit plans over $10,200 and $27,500 for family plans or individual plans plus a spouse. The tax is known as the “Cadillac tax” and is meant to help encourage companies to look for lower cost health care plans to offer their employees.
The Cadillac tax will tax the monthly amount that an applicable employer sponsored health care plan goes over the annual limit, which is known as the employee’s excess benefit. The specific tax amount for each individual employee’s coverage is calculated by the employer and is paid out by the coverage provider.
The Cadillac tax will not apply for any coverage that is thought of as an “expected benefit” or any long-term care coverage. Separate vision and dental plans that are thought as expected benefits will also not be subject to the Cadillac tax. Expected benefits include:
- Any combination of disability income insurance or accident only insurance
- Supplemental liability insurance
- Liability insurance, which includes automobile and general liability insurance
- Workers’ compensation insurance, or any similar insurance
- Auto medical payment insurance
- Credit only insurance
- Any other similar insurance coverage that is specified in the regulations of a policy, which the benefits for the medical care are incidental or secondary to any other insurance benefits.
Since the coverage provider is responsible for paying the Cadillac tax, who pays the tax will depend on the specific coverage. If the coverage is health insurance coverage, the health insurance issuer will be responsible for the tax. If the coverage is Archer MSA or HSA Contributions, the employer will be responsible for the tax. If any other type of coverage is provided, whoever administers the benefits will be responsible to pay the tax.
For more information on how you may be affected by the Cadillac tax, and for all of your health insurance needs, contact Pacific Group, with locations in both Laguna Hills and Palos Verdes Estates, California.