Tax season is here! As we get closer to the deadline for filing (in 2018, it’s April 17 instead of the traditional April 15), we wanted to share three tips about Health Savings Accounts you’ll need to know before you file your return, along with a suggestion for using your refund.
Your employer may soon have to cut back on the healthcare benefits provided to you to avoid an onerous 40% federal tax called the “Cadillac Tax”. Starting in 2018, companies that are too generous to their employees by providing attractive healthcare insurance will be hit with a huge tax. The Kaiser Family Foundation, a respected, nonprofit research group, estimates that one in four companies will be affected by this tax, and to avoid it, will have to cut back on their healthcare benefits.
To add insult to injury, the law says that starting in 2018, any pretax amount YOU put into your own Medical Flexible Spending Account or Health Savings Account has to be counted as employer-provided healthcare benefits and could trigger this 40% Cadillac tax. Yes, you read that correctly. Such contributions count as EMPLOYER contributions when calculating this tax, which means that starting in 2018 when you make these pretax payroll contributions to your own Medical Flexible Spending Account or your own Health Savings Account (HSA), your employer may have to cut back even further on the healthcare benefits provided to you if this onerous 40% tax is to be avoided.
As our Congressmen and Senators are becoming aware of the unfair nature of this tax, a bipartisan coalition is forming to change the law. This provision of Healthcare reform is so bad that even Labor Unions and Republicans have joined together to amend this portion of the Act. Politics makes for strange bedfellows at times.
Isn’t 2018 a long way off? Why do I care now?
In anticipation of this upcoming “Cadillac” tax, companies are already cutting back on their healthcare benefit packages by only offering healthcare insurance with larger deductibles, knowing that big changes to benefits packages cannot be done in just one year.
What Can You Do?
24HourFlex has joined forces with ECFC, the Employer’s Council for Flexible Compensation, to change the law. Ideally, we would like the “Cadillac” Tax provisions repealed entirely. At this time that may not be realistic. However, at a minimum we want the law changed so that YOUR pretax contributions to YOUR Medical Flexible Spending Account or YOUR Health Savings Account are NOT counted as EMPLOYER contributions when calculating this tax.