Yesterday, NAHU submitted detailed comments to the IRS and Department of Treasury on Notice 2015-52. This was the second round of implementation guidance from the Obama Administration on the looming excise tax on high-cost employer-sponsored health insurance plans. While NAHU and our coalition partners are working hard on moving legislation to repeal the excise tax entirely, at the same time the IRS and Treasury Department are moving forward with the tax’s planned 2018 effective date. In July they released Notice 2015-52, and NAHU and a team of member volunteers who expressed great interest in the excise tax have been working on our response since then. NAHU not only submitted our own detailed comments, but as steering committee members of the Alliance to Fight the 40, we also helped craft the comment letter developed by a broad-based coalition comprised of public and private sector employer organizations, unions, healthcare companies, businesses and other stakeholders that support employer-sponsored health coverage.
Notice 2015-52 focused on a few key areas of excise tax implementation so NAHU’s comments were directed at those specific proposals. We also stressed how our nation’s employers need definitive information about the tax as soon as possible, since they are making benefit decisions for the years ahead in an information vacuum right now. In particular, employers need information about how the adjustments will be made to the statutory thresholds to bring them up to current medical care cost levels, how the cost of employer coverage will be calculated and how adjustments for gender, age and high-risk industries will be applied. Furthermore, we made sure that they knew that clear guidance is needed for aggregated employer plans and all employers should be assured of safe harbors, transition relief and good-faith enforcement standards.
Some of the specific policy ideas NAHU and our coalition partners offered in our letters include:
For self-funded plans, the employer should be the entity responsible for administering and paying the tax rather than a third-party vendor. This will ensure that the entity ultimately responsible for plan design decisions is liable for the tax. It will also reduce the employer’s overall tax burden because then they will not have to pay any additional gross-up tax costs passed through to them by their TPA.
For employer plans that must be aggregated under the law (such as employers in a controlled group), aggregation means must be as simple as possible for the employers and the IRS should consider mirroring the employer shared responsibility requirement structure in terms of tax liability and payment whenever possible. That would include payment liability by entity in the case of multi-employer plans and other aggregated employers for both the initial years of the tax implementation and all out-years.
For non-calendar-year plans, NAHU encouraged a safe harbor so that they will be able to assign an entire employer-sponsored plan year to a particular tax year. This would ensure that all employers are able to make reasoned plan-design decisions for the whole year at one time and will be much better positioned to estimate their tax liability at any point in the coverage year.
Safe harbors for plan valuations based on actuarial value to make tax implementation much simpler for employers and health insurance issuers.
Transition relief for employers and coverage providers, including the use of a good-faith enforcement standard, through at least 2020.
The cost of the excise tax itself as well as any “gross-up” health insurance carriers may have to add to the cost of coverage to handle their tax payment responsibility costs should be excluded from the value of coverage for excise tax purposes.
Tax gross-ups by coverage issuers should be based on the issuers’ individual estimated marginal tax rate, including state and local premium taxes and other tax liabilities.
The calculation methods for age and gender adjustments should be available to employers as soon as possible and as easy to use as possible. They should be based on only the individuals eligible for coverage under the plan and employers should have flexibility in determining the date of the employee census used in determining the adjustment.
As for next steps, the Department of Treasury and IRS have indicated that they plan to issue at least one proposed regulation regarding the application of the excise tax to high-cost plans once feedback from this guidance and also from Notice 2015-16, which was published earlier this year, has been fully reviewed. In our letter, NAHU urged the Administration to issue this proposed rule as soon as possible so that employers will have the opportunity to test their current plan designs and provide feedback to the Administration about the workability of the pending rules. NAHU will continue to follow up with the Treasury Department on the excise tax, as well as work on repeal efforts with the Congress. As soon as a proposed rule on the excise tax is out, you be will be the first to know!