Excise tax on high cost employer-sponsored health coverage

High cost employer-sponsored health coverage

The IRS today released an advance version of Notice 2015-16 concerning potential approaches to be incorporated into future proposed regulations regarding the excise tax on high cost employer-sponsored health coverage under on section 4980I (better known as the “Cadillac tax”).

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The tax applies to health care and related expenses paid for by employers and applies a 40% tax to health care coverage that is more expensive or mostly paid for by the employer. The tax does not apply until 2018 but employers have been asking questions about the types of benefits to which the tax applies, so that they plan ahead.

Notice 2015-16 [PDF 321 KB] discusses possible approaches that may be used in regulations, for example, issues that primarily relate to:

  • The definition of applicable coverage
  • The determination of the cost of applicable coverage
  • The application of the annual statutory dollar limit to the cost of applicable coverage

Request for comments

Treasury and IRS invite comments on the issues addressed in this notice and on any other issues under section 4980I. Treasury and IRS intend to issue another notice inviting comments on certain additional issues not addressed in this notice. Comments must be submitted no later than May 15, 2015.

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