The Cadillac Tax is an annual excise tax beginning in 2018, on Employers (not employees), that provide “high cost” benefits through an Employer-sponsored Group Health Plan that is being offered to their employees.
The Cadillac Tax is an Excise tax meant to reduce health care usage and costs, by encouraging employers to offer plans that are cost-effective, and engage employees in sharing the costs of care.
The excise tax is based on the total cost of each employee’s coverage above the 2018 threshold, defining a “high cost” plan as one that exceeds $10,200 for individual coverage, and $27,500 for family coverage.
The excise tax is 40% of the cost of plans that exceed these pre-determined thresholds (adjusted for inflation in future years, along with adjustments for high-risk professions such as Construction and Law Enforcement).
Costs included in the calculation:
- Total Premiums paid by both Employers and Employees (not including deductibles, co-pays, and coinsurance expenses).
- Employer and employee contributions into Flexible Spending Accounts (FSA); Health Reimbursement Accounts (HRA); Health Savings Accounts (HSA); on-site Medical Clinics, Wellness Programs and Employee Assistance Plans (EAP’s).
- Costs Excluded from the Excise Taxes are:
- Stand Alone Dental
- Stand Alone Vision
- Accident Plan Coverage
- Disability Benefits
- Long Term Care Plans (LTC)
This excise tax applies to both fully-insured plans as well as self-funded Group Health Plans. The Tax is not tax-deductible for the Employer. Final forms and Instructions for paying the tax are not yet available.