Do You Understand the ‘Cadillac Tax’?

The Cadillac Tax could be onerous. It’s important to understand and prepare for it early to avoid unnecessary expenses.

The tax applies to benefits exceeding $10,200 for individuals and $27,500 for families beginning in 2018. It includes traditional health insurance as well as other benefits, including supplemental insurance plans, flexible spending accounts and, potentially, on-site clinics. If triggered, the tax levies a 40% penalty.

Say a company offers insurance worth $11,000 in 2018. The share of that over the cap is subject to the tax, and 40% of the $800 difference is $320.

If, however, one employee contributed $2,700 to an FSA, the company was already over the limit. Now, the entire $2,700 is charged the 40% tax, which amounts to $1,080 — quadrupling what the company would otherwise owe. The employer is charged the tax on its workers’ contributions.

HUB offers a Cadillac Tax analysis. Contact us to learn more.

Jim Sampson, REBC, RHU, ChFC, CLU
HUB International Insurance Services
1001 E. Harmony Road, Ste. A-137
Fort Collins, CO 80525
Jim.Sampson@HUBInternational.com
(970) 420-1352

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