ERIC Urges IRS to Consider Impact to Employers and Employees when Addressing the “Cadillac Tax”

May 15, 2015

Share

Washington, DC- The ERISA Industry Committee (ERIC) today submitted comments to the Internal Revenue Service (IRS) in response to their request for guidance on implementation of the 40 percent excise tax on health benefits created by the Affordable Care Act.    

ERIC members provide health and retirement benefits to millions of Americans each year.  Employers depend on these high quality benefits to attract and retain a knowledgeable and productive workforce, and employees and their families rely on these benefits.  This new excise tax represents a profound change in the tax treatment of employer-provided health coverage, which will generate a transformation in the benefits provided to workers.

Implementation of this new excise tax, which is scheduled to apply starting in 2018, will cause a significant and unprecedented upheaval in the world of employee benefits. Many employers will need to change almost every principal aspect of plan design and systems operations. 

“The IRS must recognize the employer community has never before been tasked with an undertaking of this magnitude,” said Annette Guarisco Fildes, president and CEO. “Large employers will not be able to simply flip a switch in 2018 to compute the ‘costs’ of covered employees and retirees.”

ERIC, which is the only national association advocating solely for the benefit and compensation interests of the nation’s largest employers, recommends that the IRS and Treasury:

  • Provide a two-year transition period to allow employers to structure all the benefit design changes, systems testing, and employee communications that will be necessary to comply with the new rules.
  • Narrow the definition of the types of health benefits that are subject to the tax so that add-on benefits and programs that lower the costs of health benefits such as health savings accounts, on-site medical clinics, and wellness programs would not be discouraged.Employers should be given substantial flexibility to determine the “cost” of the coverage that is subject to the excise tax.
  • Create a safe harbor that treats plans fairly across the country and does not penalize plans with a large number of older workers or who are subject to a higher tax because they live in a region of the country with high medical costs. 

“Employers want to be able to continue to provide the high-quality health benefits upon which their employees and their families rely,” added Guarisco Fildes. “ Large employers are starting to feel frustrated, however, that government rules and regulations are making this more and more difficult.  This new excise tax will cause this frustration to reach an entirely new level that is as unfortunate as it is unnecessary”. 

For a copy of the comments please email dchin@eric.org

# # #

 The ERISA Industry Committee (ERIC) is the only national trade association advocating solely for the employee benefit and compensation interests of the country’s largest employers.  ERIC supports the ability of its large employer members to tailor health, retirement and compensation benefits for millions of employees, retirees and their families. Learn more at www.eric.org