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Compliance Briefing Center

Legislation and Reform

Making it Easier for You
to Manage Benefits

Federal Spending Bill Suspends Some Affordable Care Taxes

Wrapped inside the "Omnibus Appropriations Bill," which will keep the government afloat until September 2016, was a present for most Americans. Not only did the $1.1 trillion spending package carry a $629 billion package of tax breaks, House Speaker Paul Ryan announced a two-year delay in the "Cadillac Tax" being included in the Omnibus Appropriations Bill.

Congress, with bipartisan support in the House and the Senate, address end-of-the-year priorities. The Protecting Americans from Tax Hikes (PATH) Act of 2015, also referred to as the tax extenders package, and the Consolidated Appropriations Act of 2016, both collectively referred to as the "Omnibus Appropriations Bill," passed the House and Senate by Friday, December 18, 2015.

WageWorks, Inc., along with others in the industry, has worked for over 5 years on creating parity between monthly transit and parking limits. We asked for your help with our Alert, "Legislative Activity related to Transit and Parking Parity" dated November 30, 2015.

In a related Alert, "Important Legislative Activity Update," WageWorks directed you to to participate in the campaign to extend or repeal the Excise Tax on High Cost Employer-Provided Medical Plans, better known as the Cadillac Tax.

Congress heard everyone loud and clear. Both concerns were acted upon in the Omnibus Appropriations Bill signed by President Barack Obama on December 18.

The Cadillac Tax
Through vigilant one-on-one lobbying efforts, the 40% high-cost health plan excise tax, often called the Cadillac Tax, will not kick in for 2018. With a two-year extension to provide for research and planning, the excise tax is due to begin for benefits provided in 2020. Appropriate adjustments to the dollar amount of coverage subject to the tax will reflect this two-year delay. Additionally, any excise tax imposed will be deductible (previously it was non deductible).

We applaud the efforts of Congress to delay the excise tax that is detrimental to millions of hard-working Americans because it includes employee contributions to health savings accounts and health flexible spending accounts. It also gives opponents of the tax more time to repeal the excise tax in its entirety.

Parking and Transit Parity
Through the lobbying efforts of WageWorks, the Employers Council on Flexible Compensation (ECFC), and a multitude of other interested parties, parking and transit achieved permanent parity. This means no more late or retroactive extensions to increase the commuter pre-tax monthly limit for transit. Commuters can now go forward with confidence and know what each year will bring for monthly pre-tax limits for parking and transit and vanpooling monthly limits.

Earlier this year, WageWorks announced the 2016 monthly parking limit as $255 and the monthly transit and vanpooling limit as $130. The new, permanent, rates will allow parity between parking and transit limits of $255 for 2016, and is retroactive to January 1, 2015. Indexed amounts, provided every year for cost- of-living adjustments, will affect both parking and transit monthly limits at the same rate. These fringe benefits are excluded from an employee's wage for payroll tax purposes and from gross income for income tax purposes.

Additional Tax Provisions

  • Enhanced earned income tax credit. Changes made for 2009 through 2017 calendar years are now permanent.
  • Moratorium on medical device excise tax. The provisions deliver a two-year moratorium on the 2.3 percent excise tax imposed on the sale of medical devices. The tax will not apply to sales during calendar years 2016 and 2017.
  • A levy imposed on health insurers that typically is passed onto customers in the form of higher premiums, would be suspended for a year.

These are all victories for hard-working Americans. Both of the excise taxes, on high-cost health plans and medical devices, would eventually trickle down and be paid for by the users of these products. This is a move in the right direction to help healthcare remain an affordable expense for more Americans.

Click here for a downloadable copy of this report.