After much anticipation, President Obama signed into law a massive year-end spending and tax package, which includes a two-year delay of the 40 percent excise tax on high-cost employer-sponsored health plans from 2018 to 2020, better known as the “Cadillac tax.”

In addition to the delay of the 40 percent excise tax, it has been amended from non-tax deductible to tax deductible.

The excise tax applies to the cost of employer health plan coverage exceeding certain threshold amounts, which were originally set for 2018 at $10,200 for individuals or $27,500 for families. The thresholds will likely be higher when adjusted for the delayed effective date in 2020. There will also be a study on how to determine adjustments to these thresholds to reflect age and gender differences.  

Employers, unions, insurers and industry groups have opposed the tax based on concerns around administrative and financial burdens for employers and adverse outcomes for employees.

The delayed implementation will allow additional time for the government to propose regulations. It also will provide opportunity for a comment period for all interested parties in addition to allowing employers to formulate their health benefits strategies for the long term.

In addition to delaying the tax on high-cost plans, the same legislation included a moratorium on two taxes that have already been implemented: the medical device tax and the health insurance tax. The 2.3 percent excise tax on medical devices, which took effect in 2013, will be frozen for two years. The health insurance tax, which took effect in 2014, will be suspended for one year.