Implementation of the Cadillac Tax has been Delayed, and the IRS Provides New Guidance Related to the Affordable Care Act

Lozano Smith Client News Brief
Client News Alert

December 2015

The President signed the 2016 Consolidated Appropriations Act on Friday, December 18, 2015. Included in the depths of this 2000 page omnibus tax cut and spending package is a provision that delays the effective date of the ACA's "Cadillac Tax," a 40% excise tax on high cost employer-sponsored health care plans that exceed certain federal thresholds. Originally scheduled to go into effect on January 1, 2018, the effective date of the Cadillac Tax is now pushed out to January 1, 2020.

In addition, on December 16, 2015, the Department of Treasury and the Internal Revenue Service (IRS) issued Notice 2015-87. Notice 2015-87 is a 31-page compilation of guidance and clarification on the application of various provisions of the ACA with regard to employer-provided health care coverage. The Notice includes information on future rulemaking, clarification on how employers and individuals should apply certain rules related to their group health plans, and it provides some additional grace periods. Many of the issues addressed in this Notice will have a significant impact on large employers subject to the employer shared responsibility provisions of the ACA. The following are among the topics addressed by the Notice:
  1. Identification of "employee contributions" with regard to Health Reimbursement Arrangements (HRA); flex contributions to cafeteria plans; opt-out payments for declination of coverage; and fringe benefit payments required under the Service Contract Act;

  2. Application of the adjusted 9.5 percent affordability threshold under the premium tax credit provisions to the safe harbor provisions under the employer shared responsibility provisions;

  3. Adjustments to the penalties associated with the employer shared responsibility provisions;

  4. Crediting employees with "hours of service" for certain periods of time in which no duties are performed;

  5. Application of the ACA "rehire rules" to employees who primarily perform services for one or more educational organizations, but who are not employees of the educational organization(s) (for example, because the employee works for a staffing agency);

  6. Application of the aggregation rules to government entities; and

  7. Employer reporting requirements, including penalty relief for "good faith" reporting for 2015.

Finally, on December 28, 2015, the Department of Treasury and the IRS issued Notice 2016-4, which extends the due dates for the 2015 information reporting requirements under Sections 6055 and 6056 of the Internal Revenue Code as follows:

  1. The due date for furnishing individuals with Forms 1095-B (Health Coverage) and 1094-C (Employer-Provided Health Insurance Offer and Coverage) is extended from February 1, 2016, to March 31, 2016;

  2. The due date for filing Forms 1094-B (Transmittal of Health Coverage Information Returns), 1095-B (Health Coverage), 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns), and 1095-C (Employer-Provided Health Insurance Offer and Coverage) is extended from February 29, 2016, to May 31, 2016, if not filing electronically; and from March 31, 2016, to June 30, 2016, if filing electronically. Please note that employers filing 250 or more information returns must file the returns electronically.

The provisions regarding automatic and permissive extensions for filing information returns and permissive extensions for furnishing statements will not apply to these extended due dates.

We will provide you with a comprehensive Client News Brief reviewing Notice 2015-87 and its application to employers in the coming weeks. Meanwhile, if you have specific questions regarding the impact of this Notice on your organization, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.

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As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.