On July 30, the Department of the Treasury and the Internal Revenue Service (IRS) issued a second notice regarding the 40% Excise Tax a.k.a. the Cadillac Tax. The notice provides information on possible approaches that are being considered for administering the Cadillac Tax and continues the process of gathering input that will be used to develop regulations.
This is a follow-up to the notice issued on February 23, 2015, and comments may be submitted until October 1, 2015.
The notice addresses several issues, including:
- Who pays the tax
- How the tax will be determined
- How the tax will be paid
Who Pays the Tax
Each “coverage provider” must pay the tax on its share of the excess benefit. A coverage provider is:
- The health insurer for insured coverage.
- The employer for accounts such as Health Savings Accounts (HSAs) to which the employer contributes.
- The plan benefits administrator – the agencies are seeking comments on whether this should be the third-party administrator or the entity that has ultimate responsibility for plan administration, typically the employer.
How the Tax will be Determined
The notice seeks comments on how to calculate and administer the tax. The following are some of the proposed approaches: