On December 18, 2015, Congress passed the Consolidated Appropriations Act of 2016, which includes a two-year delay of the Affordable Care Act’s 40 percent excise tax on high-cost employer-sponsored health plans (the so-called “Cadillac Tax”). When originally enacted, the Cadillac Tax was to be implemented in 2018, however, its effect has now been delayed until 2020.

In addition, the Appropriations Act also impacts the tax treatment of any liability incurred under the Cadillac Tax. While originally classified as a non-deductible tax, the Appropriations Act provides that liability for the Cadillac Tax can now qualify as a deductible expense. Although the Cadillac Tax has not been repealed, employers that have been planning for its eventual implementation now have additional time to prepare.