ACA and Benefit Plan Implications of Year-end Budget Legislation (Benefit Minute)

Posted in: Benefit Minute, Employee Benefits

ACA and Benefit Plan Implications of Year-end Budget Legislation

Last week, the Protecting Americans from Tax Hikes Act of 2015 (PATH) was signed into law.  PATH impacts several provisions of the Affordable Care Act, including the Cadillac tax, the medical device tax and the annual fee on health insurers.   The law also provides permanent parity for employer-provided transit benefits and parking benefits.

Cadillac Tax

The Cadillac tax is a 40% excise tax on high cost employer-sponsored coverage.  PATH includes a two-year delay of the Cadillac tax from its original 2018 effective date to tax years beginning after December 31, 2019. PATH also makes payment of the excise tax a deductible business expense.  It remains to be seen whether this delay will ultimately result in future legislative changes to the tax or repeal of the tax altogether.

Health Insurance Industry Tax

PATH suspends for one year (2017) the Health Insurance Industry Tax. This suspension should result in less of an increase to fully-insured group health insurance premiums in 2017.

Medical Device Tax

PATH also places a two-year moratorium on the 2.3% tax on the sale of medical devices. The tax imposed under this provision will not apply to sales during the period beginning on January 1, 2016 and ending on December 31, 2017.

Transit and Parking Parity

PATH provides for permanent parity between employer-provided transit benefits and parking benefits retroactively to 2015.  For 2015, the maximum amount that may be excluded from income tax for transit benefits or parking benefits is $250 per month.  This amount increases to $255 per month in 2016.  Prior to PATH, the monthly limit for transit benefits was $130 per month.

Please contact your PSA Benefits Consultant for more information.

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