OPM comments on the high cost plan excise tax

A colleague called the FEHBlog’s attention to this BNA article about the public comments that were submitted on the latest IRS notice (2015-52) on the 40% excise tax on high cost, employer sponsored coverage.  The comment deadline passed last week.  The FEHBlog nearly fell off his chair when he read in the article that OPM commented on the IRS notice.  The FEHBlog’s colleague kindly share a copy of the OPM comments with the FEHBlog. Here’s a link for your edification.  The FEHBlog found the OPM comments to be thoughtful.

He was delighted to read that OPM is considering converting the healthcare flexible spending account (“FSA”)  to a limit scope dental and vision FSA. The former is subject to the excise tax, while the latter according to the IRS’s first excise tax notice no. 2015-16, will be exempt from that tax. Because the cost of a full blown healthcare FSA will be added on top of the health insurance premium, a full blown healthcare FSA can push the cost employer sponsored coverage over the excise tax threshold. Employers also are considering making after tax contributions to health savings accounts beginning in 2018 because pre-tax contributions count toward the excise tax threshold. It’s a hideously complex provision that will burden all employers unnecessarily.

According to Notice 2015-52, the IRS will consider public comment on these two notices as part of the process of drafting a proposed rule implementing the tax.  Congress continues to consider repealing the tax.