The Cadillac tax is gone, but the questions it raised are not.
Congress repealed the 40 percent excise tax on high-cost employer health coverage before it ever took effect. This guide covers what it was, how it ended and what employers still do.
Five Topics On One Repealed Tax.
General information, not legal or tax advice. Each page cites the statute or IRS source it relies on.
What The Cadillac Tax Was
The formula, the 40 percent rate and the dollar limits that were written into the 2010 law.
Delays And The 2019 Repeal
Enacted in 2010, postponed in 2015 and 2018, and repealed on December 20, 2019.
What Still Applies Today
W-2 Box 12 Code DD reporting and the excise taxes and fees that outlived the repeal.
Thresholds And Plan Design
How the shadow of the limits shaped deductibles, HSAs and contributions, and what to revisit.
Questions For Your Broker
Five questions that close out lingering contract, budget and reporting concerns.
Where Things Stand.
The Affordable Care Act added section 4980I to the Internal Revenue Code in 2010. It would have charged 40 percent on the portion of an employee’s coverage cost above a dollar limit. The start date slipped from 2018 to 2020 to 2022, and the Further Consolidated Appropriations Act, 2020 repealed the section for taxable years beginning after December 31, 2019.
For employers, the practical result is simple. Nothing is calculated, reported or paid under 4980I. The related lines that people often group with it, chiefly the cost of coverage on Form W-2, are a different matter and stay on the calendar.
What lingers is judgment. Many plans were designed with the limits in view, and old budget files and contract clauses still mention the tax. The five pages above help you sort fact from habit.
Related Rules And Tools.
W-2 Box 12 Code DD: Reporting the Cost of Health Coverage
What the cost-of-coverage figure is and who must report it.
Affordable Care Act for Employers
The employer mandate, reporting and the other ACA duties in one place.
Health Savings Accounts for Employers
How employer HSA contributions and eligible plans work.
A Compliance Calendar for Your Plan Year
A plan-year view of the dates that matter.
Laws And Sources
Section 4980I, Repealed — The Code section with its repeal note and list of amending laws.
IRS, Affordable Care Act Tax Provisions — IRS statement that the Further Consolidated Appropriations Act, 2020 repealed section 4980I.
Public Law 116-94 — Further Consolidated Appropriations Act, 2020, signed December 20, 2019; Division N, Title I, Section 503 repeals section 4980I.
Public Law 115-120 — Continuing appropriations act signed January 22, 2018, which moved the start of the tax to 2022.
Public Law 114-113 — Consolidated Appropriations Act, 2016, signed December 18, 2015, which moved the start of the tax to 2020.
Public Law 111-148 — Patient Protection and Affordable Care Act, signed March 23, 2010, which added section 4980I.
Public Law 111-152 — Health Care and Education Reconciliation Act of 2010, signed March 30, 2010, which amended the section.
Section 6051 — Employer statements to employees; paragraph (a)(14) covers the cost of employer-sponsored coverage.
IRS, Form W-2 Reporting of Employer-Sponsored Health Coverage — IRS explanation of Box 12 Code DD, including the informational purpose and the relief for smaller filers.
Section 4980B — Excise tax for failure to meet COBRA continuation coverage requirements.
Section 4980D — Excise tax for failure of a group health plan to meet certain requirements.
Section 4375 — Patient-centered outcomes research fee on insured policies.
Section 4376 — Patient-centered outcomes research fee on self-insured plans.
General information, not legal or tax advice.
Quick Answers.
Brief answers to what employers ask about the repealed tax, each linked to the fuller page.
Is the Cadillac tax still law?
No. Section 4980I is repealed by Public Law 116-94, Division N, Title I, Section 503, for taxable years beginning after December 31, 2019, and the IRS lists the repeal among its Affordable Care Act tax provisions.
Did our company ever owe it?
No. The tax was postponed more than once and repealed before it applied, so no employer, insurer or plan administrator was ever charged.
Do we still report health coverage cost on the W-2?
Yes, in most cases. The cost of employer-sponsored coverage goes in Box 12 with Code DD under section 6051(a)(14), though employers filing fewer than 250 Forms W-2 have optional relief.
Why do high-cost plan questions keep coming up?
Plans and budgets built under the old limits are still in place, and premium trend has not eased. The design questions remain even though the penalty does not.
Could Congress bring the tax back?
Only by passing a new law. Today the Code shows the section as repealed, and we follow federal benefits legislation so clients hear about any new proposal early.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →