Congress passes legislation delaying three key ACA-related taxes

Published February 15, 2018

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Congressional legislation was passed and signed into law by President Trump on January 22 that included key provisions in delaying three ACA-related taxes. The delayed taxes are as follows:

“Cadillac Tax”

An extension was provided to delay the excise tax in high cost employer-sponsored health coverage to 2022. The “Cadillac Tax” is a 40% excise tax on high-cost employer health benefit plans aimed at reducing incentives for employers to pay more of employee compensation via health benefits instead of taxable wages, possibly leading to overuse of health care services and driving up overall health care costs. The thresholds originally set in the ACA for calculation of the excise tax was $10,200 for single coverage and $27,500 for family coverage, to be adjusted for inflation, with any health insurance premiums above this ceiling being taxed at 40%.

Medical Device Tax

  • The 2.3% excise tax on the sale of medical devices had its moratorium extended for an additional two years (the moratorium was originally set to expire on December 31, 2019).
  • “HIP” fee – The new legislation suspends, for 2019, the annual fee imposed on businesses providing health insurance for United States health risks. The first filings (form 8963) were due on April 15, 2014 and the first fees were due September 30, 2014. There was a moratorium on the fee for calendar year 2017 only, but did not impact the filing requirements and payment of the fee for 2016 or 2018. H.R. 195, Division D, suspends collection of the fee for the 2019 calendar year only. It does not affect the filing requirement and payment of the fee for 2018. The “applicable amount” of the fee for year 2018 remains at $14.2 billion in total from all covered entities. Generally, companies insuring U.S. health risks are subject to the fee unless they are an exempt organization under section 501(a), an insurer providing health insurance under Medicare Advantage, Medicare Part D or Medicaid or a non-fully insured multiple employer welfare arrangement (MEWA). For statutory accounting guidance, please continue to follow SSAP 106. Generally, SSAP 106 requires assignment of the amount of the fee to a special line item in capital and surplus in the data year, with expensing on January 1 of the total amount of the fee that is due by September 30 (of the fee year). As most healthcare companies are aware, this fee is not deductible for federal income tax purposes.

For more information on this new legislation, please contact MCM Partner Todd Rosenbaum via e-mail or phone (502. 882.4459).

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