IRS Seeking More Input on Cadillac Tax

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On July 30, 2015, the Internal Revenue Service (IRS) issued Notice 2015-52 seeking input from interested parties on various issues related to the Cadillac Tax.  To date, the IRS has not issued regulatory guidance on the Cadillac Tax, which is a 40% excise tax on the aggregate cost of coverage that exceeds certain dollar thresholds, but Notice 2015-52 is the second request for public input.  They previously issued Notice 2015-16 earlier this year and indicated they plan to issue preliminary regulatory guidance after receiving feedback in response to this latest Notice.

Notice 2015-52 specifically addresses and seeks input on the following issues:

  • Identification of the person or entity liable for the tax.  Section 4980I(c)(1) provides that the coverage provider is liable for the tax.  The statutory language clearly identifies the coverage provider for insured group health plans and Health Savings Accounts but not for other types of plans, including self-insured plans.  It states that the coverage provider for these other types of plans is “the person that administers the plan benefits” but fails to define the term.  Notice 2015-52 lays out two approaches the IRS is considering to identify the coverage provider.
  • Calculating the cost of applicable coverage.  The majority of the Notice is dedicated to several issues related to calculating the cost of applicable coverage, including timing issues, excluding income tax reimbursements, annual contributions to account-based plans, flex credits and carry-overs under Flexible Spending Accounts plus including amounts taxable under Internal Revenue Code Section 105(h).
  • Age and gender adjustments to the dollar thresholds.  The IRS seeks input on possible sources of data to be used for the adjustments and approaches for determining the age and gender characteristics of a particular employer’s population.
  • Notice of calculation of share of tax and payment.  Under Section 4980I, employers are required to calculate the tax and notify coverage providers and the IRS of the amount due.  The IRS is considering the form in which the information must be provided and the timing.

The public may provide comments to the IRS until October 1, 2015.