By Kate Schieldt, SHRM – SCP
President Donald Trump signed into law an end-of-the-year spending bill that included a full repeal of the Cadillac tax on high-cost health plans. The spending bill also repeals two other Affordable Care Act (ACA) taxes on employers: the health insurance tax (HIT) on fully insured health plans and the ACA’s tax on medical devices (repeal effective 2020).
The repeal is great news for all contractors and other employers who sponsor health plans, FSAs, HRAs and HSAs as well as for millions of working Americans who have consumer driven plans through their employer as those plans would have been severely impacted by the tax. The elimination of the Cadillac Tax was a top issue for many other organizations since it was passed under ACA years ago.
The Cadillac tax was scheduled to take effect January 2022, which was included in the ACA but has been delayed several times from being implemented. The Cadillac tax is a 40% excise tax on the cost to employer health plans in excess of annual cost thresholds. While the excise tax was intended to target high-value plans, if the repeal did not take place modest plans may also have been impacted, meaning employers and employees could have faced higher co-pays and deductibles.
The repeal is great news for all contractors and other employers who sponsor health plans
While the spending bill repealed some ACA taxes, it extended the inflation adjusted PCORI Fees on health insurance policies and self-insured health plans for 10 years. This is an annual fee that funds the federal Patient-Centered Outcomes Research Institute (PCORI). This was to expire for plan years ending after September 30, 2019.
Also, part of the spending plan, legislation extended the Work Opportunity Tax Credit, WOTC, for one year, through December 31, 2020. The WOTC would have expired in 2019. In a statement from Chatrane Birbal, director of policy engagement with the Society of Human Resource Management (SHRM), “The WOTC helps both employers that are experiencing labor shortages and certain groups of people who need assistance finding jobs, such as the long-term unemployed, the formerly incarcerated, individuals with disabilities and military veterans.”
Kate Schieldt is Director of Human Resource Member Services for ABC of Wisconsin