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Employer advocacy group calls for Cadillac tax leniency

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The ERISA Industry Committee has asked federal regulators to take into consideration the “unfortunate” and “unnecessary” frustrations it says employers will face as a result of the 40% excise tax on high-value group health care plans, due to take effect in 2018 under the health care reform law.

In public comments submitted Friday to the Internal Revenue Service, the Washington-based employer advocacy group said the Affordable Care Act's so-called “Cadillac tax” should not be imposed “without sufficient time for employers, as necessary, to understand, adapt to and implement these fundamental changes.”

“The IRS must recognize the employer community has never before been tasked with an undertaking of this magnitude,” ERIC President and CEO Annette Guarisco Fildes said Friday in a statement. “Large employers will not be able to simply flip a switch in 2018 to compute the 'costs' of covered employees and retirees.”

In February, the IRS published an advance notice outlining the rules under which it will likely implement the 40% excise tax on group health plans costing more than $10,200 for individual coverage and $27,500 for family coverage.

Third-party claims administrators will pay the excise tax for self-funded employers, while health insurers will pay the tax for fully insured employers, with both expected to seek reimbursement from employers.

ERIC has asked the IRS for a two-year transition period to allow employers time to restructure their health benefit plans, administration systems and employee communications to comply with the reform law, as well as an explicit exemption from the excise tax for programs designed to lower health care costs, such as health savings accounts, on-site medical clinics and wellness programs.

The group also has asked the IRS for a “safe harbor” provision in the forthcoming rules for determining the actuarial cost of their health plans.

“Safe harbors are particularly important,” ERIC said in its comments to the IRS. “There is no one method for determining 'cost,' and current actuarial practices use various approaches for making reasonable cost determinations. Employers must have sufficient time to test and implement any IRS-mandated cost determination process, and the cost determination rules must not penalize employers for cost determinations that are actuarially reasonable.”