Implementing a new “Cadillac plan” tax on high-cost employer health coverage could lead to “mind-bending tax administration issues,” according to Mark Holloway.
Holloway, a benefits compliance law specialist at Lockton Companies, makes that prediction in an analysis of a new Internal Revenue Service (IRS) Cadillac plan request for information, in the IRS Notice 2015-52. In the notice, IRS officials ask for ideas about how to implement Internal Revenue Code (IRC) Section 4980I, the section of the tax law that gives the Cadillac plan tax rules.
Because a health insurer administering the tax cannot deduct the excise tax amount from its own taxable income, the full amount an insurer will expect to get from an employer for paying the tax may be about 60% bigger than the tax payment itself, Holloway warns in the analysis.
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