Legislation Delays Cadillac Tax and Health Insurance Tax

On Jan. 22, 2018, Pres. Trump signed H.R. 195 into law. The main purpose of this legislation was to continue funding government operations and reauthorize the Children’s Health Insurance Program (CHIP) for six more years. However, it also impacts several provisions of the ACA, including the Cadillac tax and the health insurance tax (HIT).

First, the effective date of the excise tax on employer-sponsored coverage that exceeds a certain threshold, known as the Cadillac tax, has been pushed back until 2022 (tax years beginning after Dec. 31, 2021).

Second, the health insurance provider fee, also called the HIT, will be in moratorium for calendar year 2019. In other words, the HIT is effective for 2018, suspended for 2019, and effective again for calendar year 2020 and beyond. In response to the changes, the IRS released an FAQ that provides greater detail on how the provider fee is paid, when it applies and how the moratorium in 2019 affects 2018, 2020 and beyond.

Additionally, the bill delays the medical device tax, which will now be effective for sales made after Dec. 31, 2019.

The delay of the Cadillac tax and the HIT is welcome relief for employers, considering the effect these taxes may ultimately have on their plans. Bipartisan efforts for a full repeal of the Cadillac tax and HIT are likely to continue. Regardless, employers should evaluate whether plan amendments are necessary considering these recent changes.

H.R. 195 »