Mercer has produced an “excise tax survival kit,” a series of blog posts written by Mercer consultants with a broad range of insights focusing on strategies to avoid the Patient Protection and Affordable Care Act (ACA) excise tax on high-cost health plans, and how the excise tax may affect other human resource (HR) and business objectives.
In its most recent comment letter to the Internal Revenue Service (IRS), Mercer reiterated its concern that the excise tax, while intended to discourage overly rich benefits in employer-provided coverage, may have unintended impacts on plans for which high costs are driven by factors other than plan design, such as participants’ geographic location and age. This makes calculation of the application of the dollar limit adjustments a crucial piece of the excise tax legislation, Mercer says. The firm suggested approaches to age and gender adjustment that provide simple, efficient mechanisms for plans to perform this calculation to ensure alignment with established actuarial principles.
One of the initial posts in the excise tax survival kit, “When a High-Cost Plan is Not ‘High Cost,’” includes data that supports Mercer’s position that the excise tax is not a “Cadillac” tax at all.
In its comment letter, Mercer also suggests streamlined approaches to administering the tax, including allowing employers to pay the entire excise tax for their self-insured arrangements instead of parsing it out to various vendors. Building on Mercer recommendations provided to the IRS in May, the comments also suggest the use of an actuarial value safe harbor as a better measure of the richness of benefits than the law’s cost thresholds alone.
The comment period on the IRS’ second request for feedback on the tax is now closed, and proposed regulations are expected at some point in 2016.Mercer’s excise tax survival kit is available here.