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Reader asks Who Pays the Obamacare “Cadillac Tax” in 2020 for Ridgewood Municipal and School Employees?
file photo by Boyd Loving
Reader asks ,please don’t forget the ACA excise taxes from 2020~…. that’s another 40% on platinum level health benefits like those our teachers, police and fire currently enjoy. They either all need to be downgraded to bronze level health benefits or taxpayers will bear the brunt of the 40% tax on $25,000 family plans, i.e. an additional $10,000 a year per Village and BOE employee with a platinum family plan. Who pays for that?
Ridgewood NJ, On December 18, 2015, 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 year-end government funding package and changes the effective date from 2018 to 2020. While the tax was originally non-tax deductible, the December 2015 changes make it tax deductible for employers who pay it.
No regulations have been issued to date. 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.
What it is/fee duration
Permanent, annual tax beginning in 2020 on high-cost employer-sponsored health coverage.
Purposes
Reduce tax preferred treatment of employer provided health care
Reduce excess health care spending by employees and employers
Help finance the expansion of health coverage under the Affordable Care Act (ACA)
Amount
The tax is 40% of the cost of health coverage that exceeds predetermined threshold amounts.
Cost of coverage includes the total contributions paid by both the employer and employees, but not cost-sharing amounts such as deductibles, coinsurance and copays when care is received.
For planning purposes, the thresholds for high-cost plans are currently $10,200 for individual coverage, and $27,500 for family coverage.
These thresholds will be updated before the tax takes effect in 2020 and indexed for inflation in future years.
The thresholds will also be increased:
If the majority of covered employees are engaged in specified high-risk professions such as law enforcement and construction, and
For group demographics including age and gender.
For pre-65 retirees and individuals in high-risk professions, the threshold amounts are currently $11,850 for individual coverage and $30,950 for family coverage. These amounts will also be indexed before the tax takes effect.
Who calculates and pays
Insured: Employers calculate and insurers pay
Self-funded: Employers calculate and “the person who administers the plan benefits” pays
HSAs and Archer MSAs: Employers calculate and employers pay
How a group health plan’s cost is determined
The tax is based on the total cost of each employee’s coverage above the threshold amount.
The cost includes contributions toward the cost of coverage made by employers and employees.
The statute states that costs of coverage will be calculated under rules similar to the rules for calculating COBRA premium.
How the tax will be paid
Forms and instructions for paying the tax are not yet available.
Tax implications
Based on the December 2015 changes, Cadillac Tax payments will be deductible for federal tax purposes.
Applicable types of coverage
Insured and self-insured group health plans (including behavioral, and prescription drug coverage)
Wellness programs that are group health plans (most wellness programs)
Health Flexible Spending Accounts (FSAs)
Health Savings Accounts (HSAs), employer and employee pre-tax contributions*
Health Reimbursement Accounts (HRAs)*
Archer Medical Savings Accounts (MSAs), all pre-tax contributions*
On-site medical clinics providing more than de minimis care*
Executive Physical Programs*
Pre-tax coverage for a specified disease or illness
Hospital indemnity or other fixed indemnity insurance
Federal/State/Local government-sponsored plans for its employees
10 thoughts on “Reader asks Who Pays the Obamacare “Cadillac Tax” in 2020 for Ridgewood Municipal and School Employees?”
Anonymous
Platinum healthcare is way to expensive to be affordable by any organization any more, but let’s at least get the numbers right. As the article states, the tax is paid on cost over the threshold, so, if the threshold is $27,500 for families and the plan costs $30,000, the tax is $1000, not $12,000.
Still a ton of money, especially on top of above-market salaries.
Yep, the 40% “Cadillac” excise tax will be applicable on state & local government-sponsored “Platinum” plans for employees…. currently the majority of our Village and BOE employees have these plans, and at 40% of the $27,500 for family coverage, Ridgewood taxpayers are currently liable to pay an extra $10,960 per employee per year for these family health plan benefits from 2020~. Just where is our new Council and BOE on this as they negotiate new contracts that will take us through 2020 with teachers and police? Why isn’t the REA/NJEA, who were in favor of Obamacare, discussing this as part of their hostile and bad faith negotiations with the BOE? Is the PBA open to negotiation on this to lower benefits to bronze level health plans for retirees and current employees so Village taxpayers can avoid these extra excise tax related costs?
Also, from 2021 onwards the ‘Cadillac tax’ threshold adjusts upwards from 27,500 by CPI each year. But medical inflation is much higher than CPI, meaning insurance costs will rise much faster and a larger share of the premiums will be subject to the tax.
This is intentional, done to increase the taxes collected to subsidize Obamacare.
So negotiating for no increase to insurance premiums is crazy – the portion paid by taxpayers will keep increasing each year!
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Platinum healthcare is way to expensive to be affordable by any organization any more, but let’s at least get the numbers right. As the article states, the tax is paid on cost over the threshold, so, if the threshold is $27,500 for families and the plan costs $30,000, the tax is $1000, not $12,000.
Still a ton of money, especially on top of above-market salaries.
Yep, the 40% “Cadillac” excise tax will be applicable on state & local government-sponsored “Platinum” plans for employees…. currently the majority of our Village and BOE employees have these plans, and at 40% of the $27,500 for family coverage, Ridgewood taxpayers are currently liable to pay an extra $10,960 per employee per year for these family health plan benefits from 2020~. Just where is our new Council and BOE on this as they negotiate new contracts that will take us through 2020 with teachers and police? Why isn’t the REA/NJEA, who were in favor of Obamacare, discussing this as part of their hostile and bad faith negotiations with the BOE? Is the PBA open to negotiation on this to lower benefits to bronze level health plans for retirees and current employees so Village taxpayers can avoid these extra excise tax related costs?
Also, from 2021 onwards the ‘Cadillac tax’ threshold adjusts upwards from 27,500 by CPI each year. But medical inflation is much higher than CPI, meaning insurance costs will rise much faster and a larger share of the premiums will be subject to the tax.
This is intentional, done to increase the taxes collected to subsidize Obamacare.
So negotiating for no increase to insurance premiums is crazy – the portion paid by taxpayers will keep increasing each year!
Sadly the Surest vote is with your Families Feet hitting the moving vans out of Ridgewood.
From above
“The tax is 40% of the cost of health coverage that exceeds predetermined threshold amounts.”
So if the value is 30,000 and the threshold is 27,000 the tax would be due on the 3,000 difference.
40% of 3,000 is 1,200.
It also says above that employers calculate and employees pay.
Time to diminish benefits
trump will put it down the drain.
yeah ok 102pm.
Amazing the REA is trying to dump this mess – that they supported – on to taxpayers
can’t wait for the man trump to be the boss.