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Cadillac Tax is Delayed, but Not Gone

Old-Fashioned American Car

For employers, a big break: the 40% excise tax on high-cost health coverage under the Affordable Care Act (“ACA”), commonly referred to as the Cadillac tax, has been delayed for two years and will now go into effect for tax years after 2019. In addition, this Tax was modified to be deductible, and a study has been established to explore the benchmark for the “age and gender” adjustment.1

Initially proposed in 2010 as part of the ACA, the Cadillac tax imposes a 40 percent excise tax on high-cost health benefit plans. This ACA provision taxes any amount by which the cost of an employee’s applicable employer-sponsored coverage exceeds a threshold amount specified in the statute, specifically over $10,200 annually for individual coverage and $27,500 for family. It was originally set to take effect for taxable years after 2017.2

The American Health Policy Institute had previously surveyed the potential impact of the Cadillac tax and found that large employers subject to the excise tax would pay, on average, $2 million a year between the years of 2018 and 2024, or an average of $2,700 per employee.3 With so much money on the line, the survey revealed that employers can’t afford to ignore the tax.

While the delay means employers may not have to worry about the tax immediately, it doesn’t mean they should stop planning for it. Employers should use this time to chart out a strategy and think about next steps, including:5

  • Evaluating the health plans they’re offering and making adjustments, if necessary. This could mean exploring alternate options, like private or public exchanges, for example.
  • Involving their CFO in health strategy discussions so they can help troubleshoot ways to control costs.
  • Working with their human resources department to cultivate a workplace culture where employees take charge of their health. They should also promote healthy lifestyle programs and activities, and consider offering financial incentives.
  • Exploring innovative technologies to help drive employee engagement and education about their health plans, and assist in managing costs.

For additional resources, and to remain updated on all information related to the Affordable Care Act, click here. To learn more about ADP’s suite of health compliance tools, visit ADP SmartCompliance® at:

Learn More About ADP SmartCompliance®


1Year-End Legislation Includes Provisions Affecting Employers –

2Q&A: What is the ‘Cadillac Tax’ and Why Is It in Trouble? –

3The Impact of the Health Care Excise Tax on U.S. Employees and Employers –

4,5Employers Act to Control Health Care Costs –


The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice.  The information and services ADP provides should not be deemed a substitute for the advice of any such professional.  Such information is by nature subject to revision and may not be the most current information available.



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