Many let out a sigh of relief after the repeal of the “Cadillac tax” on high-cost employer-sponsored health plans.

What is the Cadillac tax?  Under the 2010 Affordable Care Act (“ACA”), plan sponsors and insurers were required to pay a 40% excise tax on high-cost employer-sponsored health plans for employees.  The implementation of the tax had been delayed in the past, but it was set to go into effect on January 1, 2022.  In anticipation of the tax, businesses had been attempting to reduce employee benefits or increase employees’ out-of-pocket contributions in an effort to remain below the cost thresholds that would have triggered the tax.

However, President Trump signed a $1.4 trillion spending package, the Further Consolidated Appropriations Act, 2020, which repealed the Cadillac tax.  The Act also contains other provisions that will impact health and welfare plans, including an extension of the federal tax credit for employers providing paid family and medical leave through 2020.  The tax credit had been set to expire on December 31, 2019.