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The Wagner Law Group

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 

 

Established in 1996, The Wagner Law Group has 22 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.

  

 

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Boston 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110


Palm Beach Gardens 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

Tampa

Tel: (813) 603-2959

Fax: (813) 603-2961

101 East Kennedy Boulevard

Suite 2140
Tampa, FL  33602 

 

San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104

 

St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
100 South 4th Street, Suite 550
St. Louis, MO  63102 

 

www.wagnerlawgroup.com

 

 

 

 

August 7, 2015

 

 Health and Welfare Law Alert

 

 

 

More Guidance and More Questions on Cadillac Tax

 

 

 

The IRS has issued additional guidance on the Affordable Care Act's ("ACA's") 40 percent excise tax on "high-cost, employer-sponsored group health plans (i.e., the "Cadillac tax"), which is currently scheduled to begin in 2018. In Notice 2015-52, the IRS discusses a number of issues concerning the tax, including who is responsible for paying the tax and how to calculate the tax for various types of plans. However, this new Notice seems to raise more questions than it answers.

 

Background.

The ACA provides that a non-deductible 40 percent excise tax will be imposed on "applicable employer-sponsored coverage" in excess of statutory thresholds (in 2018, $10,200 for self-only, $27,500 for family). These amounts are subject to increases based on age and gender, and for certain individuals in high-risk professions. Bipartisan legislation has been introduced to repeal this confusing and unpopular tax.

 

Who Pays the Tax?

In general the tax must be paid by the "coverage provider." This is defined as: (a) the health insurance issuer, in the case of applicable coverage under a group health plan that provides health insurance coverage; (b) the employer, in the case of applicable coverage under an arrangement in which the employer makes contributions (e.g., self-funded plans, flexible spending accounts with actual employer contributions, and health savings accounts);, or (c) "the person that administers the plan benefits." The definition of "the person that administers" and the application of these rules to multiemployer plans will be determined in future guidance.

 

Determining Cost of Coverage.

To calculate the cost of coverage, an employer must determine the extent, if any, to which the cost of coverage provided to an employee during each month exceeds the Cadillac tax dollar limit. The employer then must notify both IRS and the coverage provider of the amount of the excess benefit, and the tax must be paid by the coverage provider. According to the Notice, "IRS anticipates that employers will be required to determine the cost of applicable coverage provided during a taxable year sufficiently soon after the end of that taxable year to enable coverage providers to pay any applicable tax in a reasonably timely manner."

 

IRS says that the cost of coverage may be determined in a manner similar to the method used to determine COBRA premiums but has requested suggestions on alternative methods to determine cost.

 

IRS has also asked for assistance on how an employer can determine whether its particular costs are effected by the age and gender mix of its employees. IRS is considering a requirement that an employer use the first day of the plan year as a snapshot date for determining the composition of its employee population. In other words, an employer would be required to determine the age and gender of each employee as of the first day of the plan year and determine whether this would qualify for the age and gender adjustment of the Cadillac tax.

 

Also, the Notice says that if an employer has its premiums increased by the "coverage provider" (e.g., an insurance company) to pay for the Cadillac tax, this increased premium will not be included in calculating the cost of the coverage and will be taxable income for the coverage provider. However, the method of determining how this exclusion and taxation will operate has not yet been determined.

 

Payment of Tax

IRS is asking for comments on both the method of providing information to the various coverage providers, and the timing of when that information must be provided. It has said it may use Form 720, Quarterly Federal Excise Tax Return, for the payment of the tax. Although Form 720 generally is filed quarterly, under this approach, a single specified quarter of the calendar year would be designated for the use of Form 720 to pay the Cadillac tax.

  

 

 

 

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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.