This week, we, along with other industry advocates from ECFC, had the opportunity to meet with Congressional staffers to educate them on the benefits pre-tax accounts provide to average Americans. Our specific goal was to educate Congressional staff on the impact to these accounts under the Cadillac Tax.
What impact does the Cadillac Tax have on pre-tax benefit accounts?
The Cadillac Tax charges a 40% excise tax to plan sponsors on any “employer-sponsored health benefits” above a designated threshold. The value of both employer and employee pre-tax contributions to FSAs and HSAs are included in this calculation. When you factor these contributions into the calculation, many plans will be at risk for exceeding the threshold and becoming subject to the tax. In response, employers are likely to limit their exposure to the tax by restricting the use of these valuable pre-tax benefit accounts for employees.
What is our primary objective?
While we support full repeal of the Cadillac tax, we also recognize that there is a financial consideration, which may make this challenging to achieve. If full repeal cannot be achieved, we are recommending that legislators consider modifying the calculation for the Cadillac Tax to exclude employee contributions to an FSA and HSA.
What can you do?
We encourage employers, participants, consultants and other involved with pre-tax benefit accounts to reach out to your legislators to express your support for S. 2698 – The Preserving Consumer Health Account Act. This bill was just introduced in the Senate and specifically asks for employee contributions to FSAs and HSAs to be excluded from the Cadillac tax calculation. A companion bill is expected to be introduced in the House in the near future.