Employee Benefits Tax

Heads Up: A Tax on Employee Benefits Is Coming Your Way


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What You Need to Know

The accelerating nature of the tax will prompt many employers to continually increase cost sharing and/or eliminate benefits. On-site clinics, on-site pharmacies, wellness programs, flexible spending accounts and health savings accounts could all be in jeopardy.

If health insurance premium prices increase moderately, the tax would hit between almost 30 percent of manufacturers’ plans by 2025 and more than 80 percent by 2035. If they increase at a higher rate, the employee benefits tax would affect 60 percent of plans in the manufacturing sector by 2025 and virtually all plans by 2035.

Job losses from the tax could total 2.6 million by 2035, and real personal income in 2014 dollars would be reduced by almost $3,800 per household. The economic tax burden would reduce GDP by 1.7 percent by 2035.

The Affordable Care Act implemented a tax on employee health care benefits that is set to go into effect in January 2018. A new study commissioned by the National Association of Manufacturers (NAM), titled Heads Up: A Tax on Employee Benefits Is Coming Your Way, takes a close look at the economic impact of this 40 percent tax on health benefits under several scenarios.

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Latest News From the NAM
New Study Shows Virtually All Manufacturers Impacted by Tax on Employee Benefits

“Manufacturers have always provided generous health care benefits to their employees—in fact, at least 97 percent were doing so before enactment of the ACA. Our desire to do so is steadfast. However, this tax is just one more example of how Washington has failed workers. It will significantly add to the cost of manufacturing in America, making it far more difficult for manufacturers to continue to provide benefits when they must compete with manufacturers overseas. Health care costs and regulations are already a top concern for manufacturers; this tax makes the situation worse. This study shows just how many middle-class families and manufacturers are going to be hurt by this tax, and it is time for our lawmakers to repeal it.”

Statement from NAM President and CEO Jay Timmons, December 8, 2015

Understand the Issue

Many voters (44 percent) are unsure of what the “Cadillac Tax” is, while less than one in three (28 percent) were able to correctly identify it as a tax on “high cost health plans.”

 After learning more about the tax, 48 percent say it should be repealed, 18 percent say it should be delayed and only 10 percent say the tax should be “started as is.”

Nearly one in two (45 percent) of voters said compared to when the 2010 health care law was passed, their health care is now “less affordable”; six in ten voters (57 percent) say it will get “more expensive” in the long run.

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Press Releases

  • 06/22/2016
    Rising Health Care Costs Continue to Challenge Manufacturers
    NAM Senior Vice President of Policy and Government Relations Aric Newhouse issued a statement after the House Republican Task Force on Health Care Reform released a white paper to improve and update our health care system.
  • 12/30/2015
    2015: A Year of Historic Victories for Manufacturers
    NAM President and CEO Jay Timmons issued a statement after a year of historic victories for America’s manufacturers and job creators.
  • 12/18/2015
    Timmons: This Is an Historic Victory for Our Country
    NAM President and CEO Jay Timmons issued a statement after Congress passed historic spending legislation with many key manufacturing priorities including significant business tax relief, an end to the ban on crude oil exports, a two-year delay of the Cadillac tax, a repeal of onerous Country-of-Origin labeling requirements and new rules to ease the public–private exchange of cybersecurity information.