Treasury & IRS Second Notice Regarding 40% Excise Tax

The Department of the Treasury and the Internal Revenue Service (IRS) issued a second notice regarding the 40% Excise Tax, which provides additional details on possible approaches for the administration of the Excise Tax (Cadillac Tax).
We’ve simplified this into a: Who, What When, Where, Why and How update.
Who Pays This Tax
The coverage providers listed below must pay the Excise tax on their respective share of the excess benefit.

• Health insurers.
• Employer for accounts such as the HSAs to which the employer contributes.
• Plan benefits administrators – the IRS is seeking comments on this.

What Is The 40% Excise Tax (Cadillac Tax)
The 40% excise tax scheduled to take effect in 2018, and is intended to reduce health care usage and costs, and to do so by encouraging employers to offer cost-effective plans, which incentivize employees to share in the cost of their care. The tax impacts plans which exceed the following two income limits: $10,200 for individual coverage or $27,500 for family coverage
When – After the end of each calendar year, employers must determine if the cost of coverage exceeded the allowed limit. Employers must notify the IRS and each coverage provider of their respective share of the excess benefit, and the tax is then calculated and paid.
Where – U.S. employers will be aggregated and treated as a single employer.
Why – The 40% Excise Tax (Cadillac Tax) was designed to raise revenue to offset the costs incurred with ACA, and most it expect it will raise significant revenue once fully in effect.
How – The Excise Tax is based on current thresholds (for 2018), which as noted previously, are $10,200 for individuals and $27,500 for families. The notice requests input on how future adjustments should be determined. The notice also proposes that both employer and employee contributions to accounts such as HSAs, HRAs, and FSAs would be allocated to in equal proportions, each month of the plan year, regardless of when the contributions were actually made.
To view the DOT and IRS second notice, click here.