Starting in 2018, the “Cadillac tax” is intended to encourage employers to choose lower-cost health plans for their employees. A 40% excise tax will be applied to the cost of an applicable employer-sponsored health plan that exceeds the annual limitations of $10,200 ($850 per month) for individual coverage and $27,500 ($2,291 per month) for other than individual coverage.
The Internal Revenue Service (IRS) is still expected to issue additional guidance on the Cadillac Tax. In addition, the annual limitations noted will likely be adjusted to reflect the anticipated increase in health care costs and the cost of living between now and 2018. Given this information, we do suggest employers wait for additional guidance before taking any action. Austin & Co., Inc. will continue to monitor the developments of the Cadillac Tax and provide updated information as it becomes available.