Budget Agreement Delays ACA Excise Tax
Counties can all let out a collective and well-earned exhale.
Legislation passed today in Congress will delay the implementation of the Affordable Care Act (ACA) excise tax, also known as the “Cadillac Tax,” which imposes an excise tax of 40 percent starting in 2018 on health plans whose value is more than $10,200 for individual coverage and $27,500 for a family (the tax only applies to the amounts that exceed the threshold). CSAC has been a leading local government voice relaying concern about the effects of the tax, which would provide close to $90 billion over the next ten years to help fund the ACA.
The 2,009 page bill – we won’t make you read the behomoth, the excise tax language is on page 2,000 – includes a provision that delays implementation of the tax by two years, and also allows employers to deduct the tax. Additionally, the bill requires a study on setting appropriate benchmarks and adjustments for age and gender (one of CSAC’s principal requests in letters to the Internal Revenue Service). Congress voted to pass the bill this morning and President Obama is expected to sign it later today.
Without this change, employers would have been required to pay the tax beginning in 2018 (for taxable year 2017). The extension pushes that to taxable year 2019. The Internal Revenue Service (IRS) has released Notices of Proposed Rulemaking regarding the application and administration of this tax, and CSAC has submitted comments detailing county concerns (available here and here). The potential fiscal implications of this provision would likely be very significant for public employers.
The fight is not over; CSAC continues to place a high priority on educating the federal government and IRS on the effects of the excise tax on our counties and will maintain our effort to ensure those concerns are fully addressed.
Questions? Please contact Faith Conley, CSAC Legislative Representative, at 916.650.8180.