Internal Revenue Code (IRC) Section 4980I — the new Cadillac plan excise tax — could push health benefit plan administrators into bitter fights over which administrators actually have to pay the tax.
The health insurance issuer will pay the tax for an insured plan, but the “person that administers the plan benefits” will pay the tax for a self-insured employer plan, according to Internal Revenue Service (IRS) Notice 2015-52.
In some cases, deciding who the administrator is could be complicated.
Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) imposed a 40 excise tax on “high cost” plans in an effort to raise tax revenue and to give employers an incentive to hold down health care costs.”
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An affected “coverage provider” is supposed to pay the tax on “excess benefits” in taxable years starting after Dec. 31, 2017. In the first year, the tax is supposed to apply to individual employee benefits with a value over $10,200 and family benefits with a value over $27,500.
For a self-insured plan, the “person that administers the plan benefits” could be the plan sponsor, but it also could be the individual or entity “responsible for performing the day-to-day functions that constitute the administration of plan benefits, such as receiving and processing claims for benefits, responding to inquiries, or providing a technology platform for benefits information,” Karen Levin and other IRS officials write in Notice 2015-52.
Under another approach, the “person that administers the plan benefits” could be the individual or entity that “has the ultimate authority or responsibility under the plan arrangement with respect to the administration of the plan benefits…regardless of whether that person routinely exercises that authority or responsibility,” officials say.