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IRS Seeks Comments on Cadillac Tax

Posted on March 6th, 2015

The IRS released Notice 2015-16 which describes potential approaches that may be used in developing future regulatory guidance for the Excise Tax on High Cost Employer-Sponsored Health Coverage (a.k.a. Cadillac Tax). The Cadillac Tax would apply a tax of 40% to health coverage values that exceed certain thresholds starting in 2018. The threshold used for the value of coverage will adjust each year for inflation, but it’s estimated it will be $10,200 for single coverage and $27,500 for family coverage starting in 2018. The value of coverage includes:
 
Employer and employee premium contributions for major medical coverage
Employer and employee contributions to Health Flexible Spending Accounts (FSAs)
Employer contributions to Health Savings Accounts (HSAs), and employee contributions made via payroll deduction to HSAs
“Value” of a Health Reimbursement Arrangement (HRA) – usually an amount that is lesser than the maximum annual reimbursement, and the guidance provides approaches to determine the value
Certain other types of coverage and benefits
 
The IRS is seeking comments in regards to this notice as they start to formulate the Cadillac Tax regulations. Comments are due by May 15, 2015.  
 
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The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.

 

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