PPACA Tax Overview BenefitMall Reference Guide - (Page 10)
4.7
What income is excluded from the new
tax hike?
Income not subject to the modified adjusted gross
income calculations includes income derived from:
tax-exempt municipal bond interest, capital gains
excluded from the sale of a principal residence,
non-taxable veteran’s benefits, and IRA, 403(b) plan,
401(k) plan, 457 plan, or pension distributions.
Proceeds from stock bonus plans, profit-sharing plans
or qualified annuity plans are also exempt.
PART B: Excise Tax on Comprehensive, High-Cost Health
Insurance Plans
4.8
What is the new excise tax on
comprehensive, high-cost insurance
plans?
In an effort to penalize employers who offer
excessively rich health benefit plans, PPACA includes
an excise tax on high-cost health plans, called
“Cadillac” health arrangements. This is a new,
non-deductible 40% excise tax that some experts
have estimated will affect more than half of large
employers’ active health plans by 2018.
The Congressional Budget Office estimates that
19 percent of workers with employment- based
coverage would be affected by the excise tax in 2016,
and hypothesize that “most people would avoid the
cost of the excise tax by enrolling in plans that had
lower premiums.” The study then states that this is
only a guess, as how enrollees, insurers, employers
and other key actors will respond to the tax is
extremely uncertain.
Currently, employees are able to exclude from gross
income calculations both employer contributions
for health care coverage and the value of medical
services that the employee receives under the
coverage. Edward A. Zelinsky writes, “This favorable
tax treatment effectively immunizes the employee
from confronting the cost of his medical coverage
and services. This, in turn, leads to elevated levels
of medical service consumption and the large costs
attendant to such consumption.” Thus, the excise
tax was included in PPACA to generate additional
revenue to help pay for the uninsured and to motivate
employers to use utilization reducing measures
that would not reward overutilization of health care
services.
EMPLOYER
PLANS WIL
THE EXCIS
4.9
4.10
When does the excise tax become
effective?
The tax becomes effective January 1, 2018.
How is the excise tax calculated?
The 40% nondeductible tax will be levied on
employers and assessed against the annual value
of any excess benefit provided under applicable
employer-sponsored coverage.22
Excess benefit is
defined as exceeding the aggregate of $10,200 for
single coverage or $27,500 for family coverage in
2018. Those in high-risk professions and retirees are
subject to higher thresholds.
4.11
What is excluded from the excise tax
calculation?
Stand-alone vision and dental benefit expenses
are excluded from the calculation. Employers with
a workforce of older or female workers who have
higher-than-average health costs will be held to higher
thresholds.
10 Published by BenefitMall®
Table of Contents for the Digital Edition of PPACA Tax Overview BenefitMall Reference Guide
PPACA Tax Overview BenefitMall Reference Guide
Table of Contents
Individual Mandate & Tax Implications
Premium Subsidies
Employer Requirements & Tax Implications
PART A: Small Employer Tax Credits
PART B: Large Employer Tax Penalties
PART C: Employer W-2 Reporting Requirements
PART D: Employer Deductions for Retiree Drug Coverage
Additional PPACA Tax Provisions Impacting Employers & Employees
PART A: The Unearned Income Medicare Contribution Tax
PART B: Excise Tax on Comprehensive, High-Cost Health Insurance Plans
PART C: Assessing the Impact of PPACA on HSAs, MSAs, FSAs, & HRAs
Medicaid & Medicare Changes & the Impact on Employers
PART A: The Expanding Medicaid Program
PART B: Emphasis on Prevention & Related Services
PART C: Medicare Part D Updates
PART D: Putting the Coverage Puzzle Together
PPACA Tax Overview BenefitMall Reference Guide
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