ACA Taxes Affected by Short-Term Spending Resolution
A short-term spending resolution has been signed into law by President Donald Trump on January 22, 2018 thus ending a government shutdown, and continuing to fund the government through February 8, 2018. This continuing resolution impacts the following three taxes and fees under the Affordable Care Act (ACA):
Delays implementation of the â€śCadillac Taxâ€ť from 2020 to 2022
The â€śCadillac Taxâ€ť is a 40% excise tax imposed by the ACA on high-cost group health coverage. This provision taxes the amount (if any) by which the monthly cost of an employeeâ€™s applicable employer-sponsored health coverage exceeds the annual limitation (called the employeeâ€™s excess benefit). The tax amount for each employeeâ€™s coverage will be calculated by the employer, and paid by who provided the coverage.
There are indications that this additional delay will lead to an eventual repeal of the â€śCadillac Taxâ€ť provision. Bills have been introduced into congress to repeal this tax over the past several years, and although President Trump has not directly indicated that he intends to repeal this tax, repealing and replacing the ACA is a priority for his administration.
Provides an additional one-year moratorium on the health insurance providers fee for 2019
Starting in January 2014, the ACA imposed an annual, nondeductible fee on the health insurance sector, allocated across the industry according to market share. The 2016 federal budget suspended collection of the health insurance providers fee for the 2017 calendar year. Thus, health insurance issuers were not required to pay these fees for 2017.Â However, this moratorium expired at the end of 2017.Â It is important to note that the fees continue to apply for 2018.
Keep in mind, employers are not directly subject to the health insurance providers fee. In many cases, providers of insured plans have been passing the cost of the fee on to the employers sponsoring the coverage.Â As a result, this one-year moratorium may result in significant savings for some employers on their health insurance rates.
Extends the moratorium on the medical device excise tax for another two years, through 2019
The ACA also imposed a 2.3% excise tax on the sales price of certain medical devices, effective beginning in 2013. In general, the manufacturer or importer of a taxable medical device is responsible for reporting and paying this tax to the IRS.
The 2016 federal budget suspended collection of this tax for two years in 2016 and 2017 – this tax did not apply to sales made between January 1, 2016, and December 31, 2017. This additional delay applies to sales made after December 31, 2017.
As a result of both moratoriums, the medical devices tax will not apply to any sales made between January 1, 2016 and December 31, 2019.
It is vital for employers to maintain awareness of the often changing legislative environment, and the applicable existing ACA taxes and fees and how they can affect your bottom line.
For more information regarding changes to the ACA, Employee Benefits for your organization, or to speak with one of our advisors, email Jason Della Penna, Senior Vice President at Brown & Brown Benefit Advisors at firstname.lastname@example.org.