What is the Cadillac tax?

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While regulations have yet to be issued about the “Cadillac” tax, group plans valued at over $10,200 for individual coverage and $27,500 for family coverage will be subject to an excise tax starting in 2018. (The values may be adjusted for employers in high-risk industries, and based on the age and gender of the employer’s population.) The tax will be 40 percent of the “excess benefit.” For example, if an individual plan is valued at $11,000, the $800 “excess benefit” will be taxed at 40 percent.

The tax applies to all plans in the group market, including self-funded plans, but not to plans sold in the individual market. When calculating the value of your plan, you should include health coverage, prescription drug coverage, and contributions to flexible spending accountshealth reimbursement arrangements, and health savings accounts. Values do not include dental or vision coverage.