New Tax Breaks Affect Employer Benefit Plans

Taxes

Earlier today, Congress passed a sweeping omnibus spending bill including government appropriations and tax extenders. Included in the 2,200-plus page bill are four provisions of particular interest to employers that sponsor group benefit plans.

Cadillac Tax Delayed Until 2020

The Affordable Care Act (ACA) imposes a 40-percent excise tax on the value of employer-provided health coverage exceeding certain thresholds. This so-called Cadillac tax was scheduled to take effect in 2018 but now is delayed until 2020. Further, the tax will be deductible as a business expense.

Efforts to repeal the Cadillac tax are expected to continue. The two-year delay provides temporary relief to employers while giving Congress and the Administration time to consider future action.

Two-Year Moratorium on Medical Device Tax

The ACA added a 2.3-percent excise tax on the sale of medical device products, starting in 2013. Analysts cite the tax as one factor in increased health care expenses that are passed on to health insurers and employers. Today’s spending bill provides a two-year moratorium from the tax for years 2016 and 2017.

One-Year Moratorium on Health Insurance Providers (HIP) Fee

Starting in 2014, the ACA has imposed an annual fee on certain health insurers that generally is passed on to their policyholders. The new spending bill provides a moratorium for 2017.

Commuter Benefits – Parity Is Restored

Prior law provides that the 2015 monthly benefit limit for qualified parking expenses is $250 while the limit for qualified mass transit expenses is $130. Further, for 2016, the limit for parking expenses increases to $255 (due to routine IRS inflation adjustment).

Today’s law amends the relevant tax code section to increase the mass transit limit for 2015, and all future years, to automatically match the parking limit. Thus, the mass transit limit is increased to $250 retroactively for months in 2015 and will be $255 for months in 2016.

About Laura Kerekes, SPHR, SHRM-SCP

Laura Kerekes is ThinkHR’s Chief Knowledge Officer and leads the company’s human resources knowledge operations teams. She provides expertise to customers with complicated human resources and management issues, offers knowledge and guidance regarding management and HR best practices, and regularly shares her expertise through articles and webinars.