Cadillac Tax Delayed Until 2020
On December 18, 2015, President Obama signed the Consolidated Appropriations Act of 2016 (the "Appropriations Act") into law. Among other things, the Appropriations Act provides a two-year delay in the so-called Cadillac Tax (originally scheduled to take effect in 2018) and allows a deduction for the tax.
As originally drafted, the Cadillac tax imposed a 40% non-deductible excise tax on the amount of monthly group health insurance premiums that exceeded the applicable annual limits and was slated to become effective January 2018. Due to significant lobbying efforts by plan sponsors, industry trade groups, and other interested stakeholders, the delay of the excise tax until 2020 is a welcome step which provides employers additional time to plan for its implementation while politicians consider its ultimate repeal.
Whether or not the Cadillac tax is ultimately repealed or modified in other ways will now fall to a new Congress and President. In the meantime, we recommend that employers continue to work with their insurance brokers and consultants to implement cost reduction measures to avoid the Cadillac tax in 2020. We will continue to provide updates on any new developments.
IRS Extends Due Dates for Information Reporting
On December 28, 2015, the Internal Revenue Service (the "IRS") released Notice 2016-4 which extended the due dates for the 2015 Affordable Care Act information reporting requirements for insurers, self-insuring employers, and other providers of minimum essential coverage under Internal Revenue Code Section 6055, and the information reporting requirements for applicable large employers under Internal Revenue Code Section 6056.
Internal Revenue Code Section 6055 requires health issuers, self-insuring employers, government agencies, and other providers of minimum essential coverage to file and furnish annual information returns and statements regarding the coverage provided. Internal Revenue Code Section 6056 requires applicable large employers (those with 50 or more full-time employees, including full-time equivalents in the previous year (2015)) to file and furnish returns and statement relating to the health insurance offered (or not offered) to its full-time employees.
According to Notice 2016-4, the Department of Treasury and the Internal Revenue Service determined that "some employers, insurers and other providers needed additional time to adapt and implement systems and procedures to gather, analyze and report this information." Although the IRS is prepared to accept filings of the information returns beginning in January 2016, Notice 2016-4 extends the due dates as follows:
Furnishing Statements to Individuals (from February 1, 2016 to March 31, 2016)
- Form 1095-B, Health Coverage
- Form 1095-C, Employer-Provided Health Insurance and Offer of Coverage
Furnishing Statements to the IRS (from February 29, 2016 to May 31, 2016, if not filed electronically, and from March 31, 2016 to June 30, 2016 if filed electronically)
- Form 1094-B, Transmittal of Health Coverage Information Returns
- Form 1095-B, Health Coverage
- 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
- Form 1095-C, Employer Provided Health Insurance and Offer of Coverage
Because of the permissible extensions provided for furnishing Forms 1095-B and 1095-C to individuals, employees may not have the necessary information needed to confirm minimal essential coverage before they file their tax returns for 2015. As a result, Notice 2015-4 provides that individual employees can rely on information received from their coverage providers about their coverage for purposes of filing their tax returns and need not amend their returns once they receive Form 1095-B or 1095-C or any corrections.