Frequently Asked Questions About the Cadillac Tax

What is the purpose of the Cadillac tax?

First, the tax acts as a source of revenue to fund the costs of the ACA; second, to encourage the reduction of costs in providing health care; and third, to eliminate the tax benefits for employers who compensate their staff through benefits, rather than directly with taxable income.

Who is mandated to carry the cost of this new tax penalty?

While the technicalities of who pays the cost of this Cadillac tax are indicated below, it is important to note that anytime there is an associated cost to a provided benefit, the individual or business responsible for that benefit will ultimately pay the cost, either directly, or down the road, with an increase cost for the service.

The responsible party:

  • Self-funded: Employers calculate and “the person who administers the plan benefits” pays.
  • Fully Insured: Employers calculate and insurers pay.
  • HSAs and Archer MSAs: Employers calculate and employers pay.

Is anyone trying to repeal the Cadillac tax or is it set in stone?

Right now there are two measures in Congress that are intended to repeal the 40% tax; H.R. 2050, sponsored by Representative Joe Courtney and H.R. 879, sponsored by Representative Frank Guinta.  In addition the Alliance to Fight the 40 is a coalition of public and private organizations and businesses that support employer sponsored health benefits and is working to eliminate the tax.

How much am I going to have to pay in taxes after the 2018 start date?

The 40% tax will go into effect for the amount over $10,200 for an individual and $27,500 for a family. For retirees who are younger than 65, and for people in high-risk professions those limits are $11,850 for an individual and $30,950 for a family.

Individual coverage
Plan Cost     $11,000     $12,000     $13,000     $14,000     $15,000
Tax               $320          $720           $1,120        $1,520         $1,920

Family coverage
Plan Cost     $28,000     $30,000     $32,000     $34,000     $36,000
Tax               $200            $1,000        $1,800        $2,600       $3,400

Where can I go to learn more about my estimated tax?

Click here to fill out a Cadillac tax estimator.