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Cadillac Tax Out of Sight, But Shouldn't Be Out of Mind

09/30/16

  03:27:00 pm, by MedBen5   , 292 words,  
Categories: Health Plan Management, Taxes, IRS

Cadillac Tax Out of Sight, But Shouldn't Be Out of Mind

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With the implementation of the controversial Cadillac Tax postponed until 2020, it's easy for employers to put thoughts of it on the backburner... or hope that it simply goes away. But neither approach is a sound strategy, which is why MedBen recommends that clients continue to make whatever adjustments to their benefits necessary to manage health care cost increases. And our Compliance team can help.

In its current form, the Cadillac tax would assess a 40% penalty on health plans in excess of $10,200 for single coverage or $27,500 for family coverage. Earlier this year, President Obama proposed changing the threshold amount to one that would vary based on regional individual health care costs, but no action has been taken on that proposal. And while it's possible that the tax could someday be repealed, much will depend on the outcome of this year's presidential and congressional elections.

For employers, the smartest action is to assume that the Cadillac tax will take effect in 2020 and prepare accordingly. One important fact to remember is that, for Cadillac tax purposes, the value of a health care plan is determined not just by what the plan offers, but by the overall costs of the plan calculated using the same methodology as used in determining the same plan’s annual COBRA rates. So simply removing a benefit here and there will not significantly affect the coverage cost in relation to the threshold amount if the overall plan costs are not affected.

Clients who would like help determining their probability of being subject to the Cadillac tax are welcome to contact MedBen Vice President of Compliance Caroline Fraker at cfraker@medben.com. She'll be happy to run your plan through a special calculator to determine how much you may owe should the tax take effect.

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