Pages 729 through 736 lay the breathe taking groundwork of a new tax, the Cadillac Tax, that will impact not only you, but also your employer (this includes any of those defined as self employed too!).
This new tax, the Cadillac Tax, which is detailed on page 729 of the Affordable Care Act is a penalty on any employee who has excessive health coverage through employment in terms of a dollar amount and it will be imposed on:
– “an employee who is covered under any applicable employer sponsored health coverage of an employer at any time during a taxable period and who may have any excess benefit with respect to the coverage”.
The stated tax, which can be found on page 730 of the ACA is to be “hereby imposed a tax equal to 40 percent of the excess benefit”.
But what, you may be asking, is considered to be an excessive dollar amount for health coverage?
The definition of ‘excess benefit, which can also be found on page 730 of the ACA, is, to quote “with respect to any applicable employer-sponsored coverage made available by an employer to an employee during any taxable period, the sum of the excess amounts determined for months during the taxable period”.
But exactly how much are these excess amounts?
Well, again on page 730, these excess amounts are defined as any dollar amount that is over:
- ‘‘$8,500, in the case of an employee with self-only coverage”
- ‘‘$23,000, in the case of an employee with coverage other than self-only coverage.”
But there has be to considerations for those that reside in areas of the country that have a higher cost of living, right?
The answer is of course there will be some exceptions for those that reside in high income states and those States, which are defined by the ACA as “each of the 17 States that the Secretary of Health and Human Services determines had the highest average cost for employer-sponsored coverage under health plans during 2012”.
Those 17 States according to a 2012 report from the Commonwealth Fund could be:
- New Hampshire
- New York
- W. Virginia
- New Jersey
- New Mexico
- Rhode Island (just in case DC is not considered to be a state)
And the exception for those 17 States, according to the ACA on page 731, comes in the form of limit increases on those dollar amounts of that $8,500 and $23,000 and the increase will be an added 120% for 2013, 110% for 2014, and 105% for 2015.
Is that all or is there anything else that is part of all of this?
Again, of course there is and it all gets placed in the lap of employers.
Under the ACA, on page 732, employers or “the coverage provider” will be held responsible for not only calculating the tax, but also for paying the tax too and included in this amount are any contributions made by an employer into any Flexible Savings accounts (FSA’s), Health Savings Accounts (HAS’s) and any Medical Savings Accounts (MSA’s) for the benefit of the employees as well.
Is there anything else in these pages?
Like you wouldn’t have guessed, of course there is, the other caveat for employers is another penalty for not calculating the tax and that penalty is “an amount equal to such excess, plus interest of the underpayment for the period beginning on the due date for the payment of tax imposed by the ACA” which extends to the point of where “the excess relates and ending on the date of payment of the penalty”.
The bright spot, for employers who fail to “discover” this tax and penalty:
They, the employers, will have 30 days to fix this issue once discovered and from that point the penalty and the tax will then start accrue.
Have you looked at your W-2 recently?
Hopefully you will, as you see health benefits will be listed on them and this is why section 9002 of the ACA, on page 735, was created, which is the “Inclusion of cost of employer-sponsored health coverage on W-2”.
The IRS will now know exactly what has been received, by you, as a benefit for your employee health coverage.
Is it becoming even clearer why some experts are starting to state that it may be easier for companies to just drop this health coverage benefit and pay that Employer Mandate fine of $2,000 per employee?
One little side note, since we are in this section of the ACA, those that are taking advantage of HSA’s, FSA’s and MSA’s the penalties for withdrawing non qualified assets from any these accounts will now be raised to 20%, this new twist can be found on page 736 of the ACA.
Isn’t is a good thing that we passed this law before we read it because who knows what we would have found in it?
Apparently Don King was right “Only in America”.