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Study says excise tax could affect health care savings accounts
Larry Portzline//May 26, 2015//
Listen to this articleAccording to a news release, employers are making the move even though many HSA-qualified plans will likely avoid the tax, also known as the Cadillac Tax, for years.
The ABA‘s Health Savings Accounts Council told the IRS in a letter last week that HSAs are an effective way to increase health and wellness behaviors while reducing costs and enabling Americans to save for future health care and retirement expenses. To preserve these benefits, employee contributions should be excluded from the excise tax, the council said.
“Though our study shows that many HSA-qualified plans are expected to remain under the initial Cadillac Tax threshold, employers in expensive states or with expensive plans may incur tax liability right away, in 2018,” said Kevin McKechnie, the council’s executive director. “The tax is calculated monthly, so employers who contribute large amounts in one month to help employees seed accounts may need to spread contributions over the course of a plan year in order to avoid the tax.”
The council noted that the situation varies greatly between states. While HSA plans in Connecticut are likely to be affected right away, Iowa plans appear to be safe for years to come, the council said.
“We initially set out to prove that HSA plans would steer clear of the tax, but were dismayed to find some plans will be hit right away if payroll contributions are counted,” said Todd Berkley, president of HSA Consulting Services, the author of the study. “While many HSA plans will likely be a safe haven for now … this tax will eventually affect every plan in America.”
Businesses that want to estimate the affect of the tax can use the HSA Cadillac Tax Calculator.
