The “Cadillac Tax” – IRS issues Notice on 40% Excise Tax

Posted on Aug 3, 2015 in Health Care Reform, Industry & Legislative News

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:

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Group Life Insurance – What is Imputed Income?

Posted on Jul 31, 2015 in Industry & Legislative News, Success ideas

Many employers provide employees with employer-paid group-term life insurance benefits or arrange for employees to purchase group term life insurance benefits. But did you know that in some cases, if an employer pays for more than a $50,000 life insurance benefit, there can be tax implications for the employee?

Must the cost of employer-provided group-term life insurance be included in an employee’s gross income?

Pursuant to Internal Revenue Code (Code) Section 79, an employee may exclude up to $50,000 of employer- provided group-term life insurance from his or her income. This tax exclusion applies only to insurance on the life of the employee. It does not apply to insurance on the life of the employee’s spouse or dependent or other individual.

In addition, the employer may generally deduct the premiums it pays for the coverage as an ordinary and necessary business expense, so long as the employer is neither directly nor indirectly the beneficiary under the policy.

May the employer provide group-term life insurance for its employees in excess of $50,000?

Yes. However, the “cost” of the coverage in excess of $50,000 must be included in the employee’s gross income. “Cost” as used here does not refer to the premium paid by the employer but to the cost determined under the Uniform Premium Table contained in IRS regulations. The “cost” of the coverage added to an employee’s gross income is commonly referred to as “imputed income”.

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Supreme Court rules in favor of same-sex marriage

Posted on Jun 26, 2015 in Industry & Legislative News

Today the Supreme Court released its decision in Obergefell v. Hodges, a 5-4 decision. The Court ruled in favor of same-sex marriage, holding that the Fourteenth Amendment requires states to issue marriage licenses for same-sex couples. The Court also held that states must recognize same-sex marriages that were lawfully licensed and performed out of state.

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