Regulatory Update

SHRM’s Comments to the IRS: Give Employers Flexibility on the ACA’s ‘Cadillac’ Tax

May 22, 2015

The U.S. Treasury Department and the Internal Revenue Service invited the public to provide comments by May 15, 2015, on Notice 2015-16, seeking input to help Treasury and the IRS in “developing regulatory guidance regarding the excise tax on high cost employer-sponsored health coverage under the Affordable Care Act (ACA).” Under the ACA, any “excess” health care coverage (defined as any coverage that exceeds a statutory dollar limit that is revised annually) is subject to a 40% excise tax (nicknamed the “Cadillac Tax”).

The notice covers several issues related to the excise tax including how the agencies will define health care coverage, how they will determine the cost of coverage, and how they will apply the annual statutory dollar limit. In response, SHRM submitted comments on May 15 addressing specific methods suggested by the IRS to calculate costs and focused on maintaining maximum flexibility in determining the best way to value coverage. In addition, SHRM suggested that certain types of coverage not be included in the calculation—such as retiree-only plans, which tend to have higher costs, and public-sector plans that, which are often prohibited by state law from making benefit reductions.

SHRM will have additional opportunities to weigh in on the excise tax as the agencies plan to issue an additional notice focused on calculation and assessment of the excise tax and later will issue a comprehensive proposed rule for public comment.


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