08/12/2015

IRS Issues Notice 2015-52 to Request Comments on Cadillac Tax Proposed Regulations

The IRS issued Notice 2015-52 on July 30, 2015, to address additional topics pertaining to the 2018 Excise Tax, commonly referred to as the Cadillac Tax. This notice is in addition to Notice 2015-16, which first outlined various topics that are being considered as the regulations are being created to enact the excise tax.

As part of health care reform, a new excise tax will be effective in 2018 for plans that offer benefits that are calculated to be over the specific threshold as established by the IRS. Plans that exceed the threshold will have to pay a forty percent (40%) tax on any benefits over the threshold. While the final regulations enacting the law have not been issued, the IRS has been seeking comments on how the regulations should be drafted. Proposed regulations will be issued first, followed by a commenting period, and then the final regulations will be issued.

IRS Notice 2015-52 requests comments on specific topics including:

Who is liable for the excise tax?

Depending on the type of coverage, this could either be the insurance provider for fully insured plans, or the “person that administers the benefits” for other benefits except Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs). Two approaches are being considered for the “person that administers the benefits”: the entity responsible for the day-to-day administration of the plan or the entity who has the administrative authority over the plan. For HSAs and Archer MSAs, the employer is the coverage provider.

What is the cost of applicable coverage?

Various topics including the taxable period, the determination period and how to include contributions to HSAs, Archer MSAs, Flexible Spending Accounts (FSAs), and Health Reimbursement Arrangements (HRAs) in the calculation. Multiple approaches are being considered for how to best calculate the cost of coverage for the purpose of the excise tax.

The notice also requests comments on the notices required for the tax and which tax form to use when submitting payment.

While this notice does not provide concrete regulations and directions on how the tax will be implemented, it does provide additional insight into what the agencies are considering as they work to create the regulations. To read the full notice, click here.

BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such. Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.

Posted 8/12/15