More than half of employers with 5,000 or more employees could be liable for the Cadillac Tax in 2018 if no plan design changes are made to lower the cost of health benefits according to a recent study by Towers Watson. The study projects 48% of those employers will be liable in 2018 and 82% in 2023. This analysis assumes a medical trend of 7% annually.
The Cadillac Tax is a 40% excise tax on health benefits costing more than $10,200 for single and $27,500 for family coverage. This tax is imposed on employers and is non-tax deductible. While the tax is not imposed until 2018, the clock is ticking for employers to rein in health plan costs to avoid the tax.