“Cadillac” Tax on High-cost Health Coverage

For taxable years beginning in 2018, the Affordable Care Act (ACA) imposes a 40 percent excise tax on high-cost group health coverage. This tax, also known as the “Cadillac tax,” is intended to encourage companies to choose lower-cost health plans for their employees.

The Cadillac tax provision, found in Internal Revenue Code (Code) section 49801, taxes the amount, if any, by which the monthly cost of an employee’s applicable employer-sponsored health coverage exceeds the annual limitation (called the employee’s excess benefit). The amount of the tax for each employee’s coverage will be calculated by the employer and paid by the coverage provider who provided the coverage.

The Internal Revenue Service (IRS) is expected to issue guidance on the Cadillac tax requirements before they become effective in 2018.

Download Complete Legislative Brief

For more information on Cottingham & Butler or to view more news & events, please visit www.cottinghambutler.com