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Home Employers Industry Insights for Employers and Brokers Informed on ReformCadillac Tax

Cadillac Tax

On December 20, 2019, President Trump signed into law a full repeal of the Cadillac Tax (along with other ACA taxes). Read our news alert for more details.

Excise “Cadillac” Tax

This 40% tax on high-cost employer plans has been fully repealed and will never take effect.

Alliance to Fight the 40

Many employers, unions, insurers and health insurance industry groups would like to see this tax repealed or modified.

The Alliance is a group of stakeholders seeking to repeal the 40% Cadillac Tax.

Excise “Cadillac” Tax Details

On January 22, 2018, Congress passed and the President signed a two-year delay of the 40 percent excise tax on high-cost employer-sponsored health plans, also known as the “Cadillac Tax.” This delay was part of a short-term federal spending bill and changes the effective date from 2020 to 2022. The tax was delayed once before through the Consolidated Appropriations Act of 2016.

In February and July 2015, the Internal Revenue Service (IRS) issued notices covering a number of issues concerning the Cadillac Tax, and requested comments on the possible approaches that could ultimately be incorporated into proposed regulations. While the tax was originally non-tax deductible, the December 2015 changes suggest it will be tax deductible for employers who pay it.

View Printer-Friendly Fact Sheet [PDF]

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* As indicated by IRS notice issued on February 23, 2015 and subject to future regulatory clarification.

How it works: Examples based on current threshold amounts

Note: These threshold amounts will be indexed before the tax takes effect in 2022.

Self-only coverage

A $12,000 individual plan would pay an excise tax of $720 per covered employee:

$12,000 – $10,200 = $1,800 above the $10,200 threshold

$1,800 x 40% = $720

Family coverage

A $32,000 family plan would pay an excise tax of $1,800 per covered employee:

$32,000 – $27,500 = $4,500 above the $27,500 threshold

$4,500 x 40% = $1,800

These charts show how the tax increases as the plan’s cost increases

Self-only coverage

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Family coverage

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