Archived Insight | December 16, 2015

Spending Deal Delays ACA’s 40% Excise Tax on High-Cost Plans

In the early hours of December 16, 2015, Congressional negotiators reached an agreement on legislation to fund the federal government through September 2016 and to extend certain expiring tax provisions. Included in this deal are three provisions affecting the Affordable Care Act’s 40 percent excise tax on high-cost health plans, most notably a two-year delay.

This excise tax is paid when the total cost of coverage exceeds a certain threshold ($27,500 for all coverage under a multiemployer plan). The tax is paid on the amount by which the total cost of coverage exceeds this threshold.

The legislation (1) delays the effective date by two years, from 2018 to 2020; (2) makes the excise tax deductible by businesses; and (3) calls for a study to determine how best to determine the age and gender adjustment that can result in an increase in the base threshold. The House is expected to vote as early as December 17, and the Senate will vote soon thereafter.

The two-year delay gives Congress more time to devise a longer-term solution to the excise tax, including potentially amendment or repeal.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.