Let’s Discuss the Cadillac Tax

The Affordable Care Act’s excise tax, more commonly referred to as the “Cadillac Tax,” is slated to go into effect in 2018.

The initial idea behind the Cadillac Tax was to limit high-cost “Cadillac” coverage plans that offer generous benefits with little cost-sharing, effectively shielding employees from the cost of care.

No regulations have been issued at this point, but according to what is written in the Affordable Care Act, employers that provide high-cost benefits to their employees will be subject to a 40 percent, nondeductible tax on excess benefits. Per the law, employers are subject to the tax on individual plans that are valued at more than $10,200 and family plans valued at more than $27,500.

The Purpose: To generate $80 billion over the next 10 years to help finance the expansion of health coverage.


  • The tax is 40% of the cost of plans that exceed predetermined threshold amounts.
  • Cost includes the total premiums paid by both employers and employees, but not cost-sharing amounts such as deductibles and copays when care is received.
  • For planning purposes, the thresholds for high-cost plans are $10,200 for individual coverage, and $27,500 for family coverage.
  • These thresholds will be updated for 2018 when final regulations are issued and indexed for inflation in future years.
  • The thresholds will also be adjusted for:
    • High-risk professions such as law enforcement and construction.
    • Group demographics including age and gender.
  • For pre-65 retirees and individuals in high-risk professions, the threshold amounts are $11,850 for individual coverage and $30,950 for family coverage.

Insured and self-funded group health plans will be affected, while certain businesses will be excluded, including: U.S. issued expatriate plans for most categories of expatriates, stand-alone dental, stand-alone vision, accident coverage, disability benefits, and long-term care insurances.

Final regulations have not yet been issued. Keep checking back with us for updates.