ASAE submitted comments to the Internal Revenue Service last week on the upcoming “Cadillac” tax, a 40 percent, nondeductible excise tax on high-cost health plans that goes into effect in 2018.

ASAE’s comments suggest that, without revisions, the proposed rules will be “an expensive, time-consuming nightmare for employers,” likely to result in a reduction of benefits for employees.

ASAE’s comments are in response to IRS Notice 2015-52, in which the IRS seeks input on which taxpayers may be liable for the excise tax, the allocation of the tax among applicable taxpayers, and the payment of the applicable tax. ASAE held a special Power of A Town Hall on the Cadillac tax last week and is sharing its comments in the event that other associations want to use them as a model for their own comments before the Oct. 1 deadline.

A recent study by the Kaiser Family Foundation projects 26 percent of U.S. employers are at risk of paying the tax if they don’t adjust their current benefits, and the percent affected in the association community is expected to be much larger. Kaiser also found that the share of employers impacted could grow exponentially over the years if changes to plans are not made—up to 30 percent in 2023 and 42 percent in 2028.

Under the Affordable Care Act (ACA), beginning in 2018, both fully insured and self-funded employer health plans will be assessed a nonrefundable 40 percent excise tax on the dollar amount of any employee premiums that exceed annual limits of $10,200 for individual coverage and $27,500 for family coverage. While standalone dental and vision plans are excluded from the cost limits triggering the tax, the law does include several other costs paid by employers and employees, such as employer and employee contributions to flexible spending accounts or health savings accounts.

Many in the business community, ASAE included, have argued that employers will look to make changes to their benefit plans to avoid the tax. These changes will reduce benefits and transfer the cost of insurance to employees through increased deductibles, reduced covered services, use of private exchanges, and the reduction or elimination of FSAs.

A House bill to repeal the “Cadillac” tax was introduced in the spring by Rep. Joe Courtney (D-CT) but has yet to see a floor vote. A companion bill was introduced in the Senate last week by Sens. Dean Heller (R-NV) and Martin Heinrich (D-NM). Supporters of both bills have argued that the tax will hit people hardest in more expensive regions of the country like the Northeast and the West Coast.

Comments on Notice 2015-52 can be sent electronically to notice.comments@irscounsel.treas.gov.

(iStock/Thinkstock)