President Obama Signs Omnibus Spending and Tax Bill, Affecting Key Excise Taxes under the Affordable Care Act

December 23, 2015

 

On Friday, December 18, 2015, President Obama signed a $1.8 trillion omnibus spending and tax bill ("Omnibus"), which included several healthcare provisions related to the Affordable Care Act (ACA).

 

Specifically, the Omnibus package will place a two-year moratorium on the medical device excise tax (MDET) and postpone the "Cadillac" tax on employer-sponsored healthcare plans. Both taxes were considered key sources of revenue for funding the ACA.

 

1. Omnibus provides a two-year moratorium on the medical device excise tax (MDET).

 

Section 4191 of the Internal Revenue Code imposed a 2.3% tax on the sale of certain medical devices, beginning January 1, 2013.

 

Under Title 1, Section 174, Protecting Americans from Tax Hikes Act of 2015, the tax will not apply to sales after December 31, 2015 through December 31, 2017. 

 

2. Omnibus provides a two-year delay of the "Cadillac" excise tax on high cost employer-sponsored healthcare plans.

 

This excise tax, set to begin in 2017, imposes a 40% tax on the "excess benefit" an employee receives under an employer-sponsored plan. Excess benefit is defined as the aggregate cost of an employee's coverage over the applicable dollar limit, based on the same month, i.e. dollar limit is $10,200 for individual/$27,500 for family. 

 

Under Title I, Section 101, Consolidated Appropriations Act of 2016, the "Cadillac" tax will be delayed until 2019.

 

 

 

 

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