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Compliance Briefing Center

Legislation and Reform

Making it Easier for You
to Manage Benefits

Cadillac Tax Delayed until 2022


Benefits were the real winners in the stopgap government funding Bill H.R. 195. On January 22, 2018, President Trump signed into law a Continuing Resolution (CR) that included major healthcare priorities. The short-term government funding bill temporarily ends the government shut down and funds it through February 8 – so we’ll be seeing more activity on appropriations very soon. However, the Bill that was passed and signed into law addresses many healthcare issues. One, in particular, that WageWorks has been working on as one of our top advocacy priorities.

Cadillac Tax
The so-called “Cadillac Tax” will levy a 40 percent tax on the value of the employer-sponsored insurance that exceeds a certain threshold. Unfortunately, the calculation of the threshold includes employee contributions to Health Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).

It also hands over the onerous task to employers of calculating overages, on a per-employee basis for all benefits offered, and then allocating and collecting the taxes from their various benefits providers and administrators.

Originally slated to begin operation in 2018, previous legislation delayed this tax until 2020. H.R. 195 provides relief for an additional two years, delaying implementation of this excise tax until 2022.

WageWorks applauds the delay afforded to employers and employees alike. Nevertheless, despite the four-year respite, WageWorks continues to lobby for full and permanent repeal of this burdensome and expensive provision—or at the very least, an exclusion from the threshold of employee contributions to Health FSAs and HSAs.

Children’s Health Insurance Plans (CHIP)
The CHIP program helps families with children who are caught between Medicaid and unaffordable private insurance. This much-needed safety net has been funded for the next six years, providing certainty to state CHIP programs and peace of mind for CHIP families.

Health Insurance Fee
The annual fee levied on health insurance is paid by insurance providers, and drove up monthly premiums while making health insurance more expensive for everyone. The health insurance fee will not be applicable for 2019. It is set to reappear in 2020.

Medical Device Excise Tax
The manufacturers of medical devices, such as pacemakers, also paid an excise tax on their products. This excise tax drives up the cost of medical devices and perhaps hinders development of new products. Again, as with the Cadillac Tax and health insurance fee, this 2.3 percent excise tax on medical devices was delayed, but not eliminated, until 2020.

The text of H.R. 195 can be found here.