Insights

Tax Alert: Repeal of the Cadillac Tax and other ACA Changes

Among the many provisions included in the end-of-year federal budget bill were the eliminations of the following excise taxes imposed in the Affordable Care Act (ACA). The bill, passed into law on December 20, 2019, made the following changes:
 
  • The “Cadillac” tax that was scheduled to take effect in tax years beginning after December 31, 2021 has been repealed. This means employers will not be subject to a 40% excise tax on high-cost healthcare plans offered to their employees.
  • The 2.3% tax on the sale, use and lease of medical devices was scheduled to return at the end of 2019 but was repealed just in time, much to the relief of medical manufacturers and importers.
  • 2020 will be the last year that health insurance providers will be subject to The Patient Centered Outcomes Research Institute (PCORI) fee, which has been repealed for tax years beginning after December 31, 2020.

While these repeals were welcomed enthusiastically by the specific segments of taxpayers affected, it will be business as usual this year for most companies that offer health insurance plans, especially “applicable large employers” (ALEs) that continue to be subject to the employer mandate requirement and significant tax consequences for non-compliance.

If you have any questions about your company's obligations under the ACA, please contact your Grassi advisor or Jeffrey Cohen, Tax Services Leader, at jcohen@grassicpas.com.
 

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