The Patient Protection and Affordable Care Act (“ACA”)’s 40% excise tax on high-cost employer-sponsored health coverage (commonly known as the “Cadillac tax”) is slated to take effect in 2018. The IRS has issued several pieces of guidance to help administer the Cadillac tax, most recently through its issuance on July 30, 2015 of Notice 2015-52, which supplemented Notice 2015-16 (issued in February 2015). Like its predecessor, Notice 2015-52 identifies implementation challenges raised by the Cadillac tax, which may be helpful information for employers hoping to avoid or limit their exposure to the Cadillac tax.

Background -

The Cadillac tax is governed by Section 4980I of the Internal Revenue Code (the “Code”), which was added by ACA in 2010. Effective for tax years beginning in 2018, Section 4980I imposes a 40% excise tax on the excess, if any, of the aggregate cost of coverage for a month over the applicable dollar limit for the month. The applicable dollar limit will differ for self-only coverage and coverage other than self-only coverage. The applicable dollar limit for 2018 is $10,200 for self-only coverage and $27,500 for other-than-self-only coverage, subject to various adjustments, (which, interestingly, do not include any regional cost-ofliving adjustments). Notice 2015-16, the first IRS guidance on the Cadillac tax, was intended to initiate the process of developing regulatory guidance under Code Section 4980I. Notice 2015-16 described potential approaches related to the definition of applicable coverage, the calculation of the cost of applicable coverage and the applicable dollar limit. Notice 2015-52 proposes additional approaches related to the identification of taxpayers who may be liable for the tax, employer aggregation, the age and gender adjustment to the dollar limit, the allocation of the tax among applicable taxpayers, and notice and payment of the Cadillac tax. Some highlights from Notice 2015-52 that may be of interest to employers are discussed below.