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Business and Policy Areas
Business and Policy Areas

Higher Ed Community Weighs In on Cadillac Tax

June 1, 2015

NACUBO and 10 other higher education associations joined the American Council on Education in its May 14 letter to the Internal Revenue Service (IRS) in response to a notice outlining initial guidance on the so-called "Cadillac tax"—the excise tax on high cost health plans that was implemented as part of the Affordable Care Act.

While the letter focuses primarily on technical matters and definitions raised in the notice, it emphasizes two overarching themes for regulators to consider when implementing final rules: flexibility and transition.

The letter advocates a flexible approach to the development of regulations to ensure equitability in applying final rules to a wide variety of employer-provided health benefit arrangements. This would include building into the regulations alternative reasonable ways of calculating how the tax is applied and creating safe harbors to assist employers with compliance.

The letter also urges a deliberate approach to implementation that will enable health plan providers and their sponsors to understand potential implications of the new tax, along with time to make adjustments that may be required for compliance. The letter urges a two-year transition period following the existing 2018 effective date for the excise tax.

The 17-page letter further suggests that themes of flexibility and transition be woven throughout the shaping of the four major areas where the IRS specifically sought comments:

  • The definition of applicable coverage.
  • The determination of the cost of applicable coverage.
  • The applicable dollar limit.
  • Possible alternative methods of determining the cost of applicable coverage.

NACUBO anticipates the release of more proposed guidance from IRS and opportunities to submit additional comments before the final regulations take effect in 2018.


Mary Bachinger
Director, Tax Policy