OPERS delegation backs exemption from excise tax

The Ohio Public Employees Retirement System is evaluating the impact of the Cadillac tax provisions of the Affordable Care Act on the OPERS health care plan and supports an exemption from the tax for retiree-only plans.

The excise tax is scheduled to go into effect in 2018 and would apply a fee to health care providers when their coverage value exceeds certain thresholds. The tax could wind up costing OPERS millions of dollars when our system already has made changes to our health care to ensure that OPERS can continue providing coverage to our retirees and benefit recipients into the future.

An OPERS government relations team visited Washington, D.C., this week to relay OPERS’ position to Ohio’s Congressional delegation and other pension system stakeholders.

In advocating for an exemption from the tax for OPERS’ 226,000 health care coverage participants, we noted that retiree-only plans face significant cost increases compared with active-employee plans. Our plans reflect more-expensive care later in life, increasingly high rates for specialty prescription drugs and higher coverage for disabled members.

OPERS supports an exemption for retiree-only plans if the Cadillac tax is not repealed. We recommend the following remedies to be codified as part of the Affordable Care Act:

  1. Treat all retired employees as similarly situated beneficiaries: The excise tax has a different impact on those under 65 and those over 65; we believe that health care plans should be allowed to aggregate all participants to determine the value of coverage.
  2. Define “qualified retirees” to include those under 55: The law provides that an additional amount is added to the dollar limits for an individual who is a “qualified retiree.” Part of the definition of a “qualified retiree” is that the individual has attained age 55 – because we have retirees in our coverage under 55, we believe that should be recognized.
  3. Adjust excise tax thresholds for retiree-only plans: The law should permit increasing thresholds using annual, age-based adjustments, and that the thresholds for retiree-only plans be increased to reflect their higher costs.
  4. Threshold escalators should reflect actual increases in health care inflation: Excise tax threshold increases applied annually should relate to health care inflation occurring in the marketplace.
  5. Use actuarial value or safe harbors for determining the cost of coverage: We recommend allowing the cost of applicable coverage to be based on actuarial values as opposed to determining the actual cost of coverage provided to groups of employees.

OPERS will continue to keep members informed about the latest developments on the excise tax, and in the meantime those who share these concerns can contact their Congressional representatives.

 

Michael Pramik

Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.

Michael Pramik

Communication Strategist

21 thoughts on “OPERS delegation backs exemption from excise tax

  • July 30, 2015 at 2:58 pm
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    You need to post a form letter than we can send to our senators and representatives urging them to repeal or revise this Cadillac tax. Everyone knows except the government that we use more health care as we age.

    Reply
    • August 3, 2015 at 9:12 am
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      Michael,

      When the time is right, we might include a call to action in our communication on the Cadillac tax.

      –Ohio PERS

      Reply
  • July 30, 2015 at 3:10 pm
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    What about the higher threshold for “high risk” retirees ? Maybe it’s time to put the brakes on implementing this 2 years before it is Federally required.

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    • August 3, 2015 at 9:37 am
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      Tom,

      We can repeat the answer we gave you to this question on July 16:

      As far as “high-risk” members are concerned, we are aware that there are higher thresholds for high risk professions; however, for OPERS, a very large proportion of our retirees will not meet this definition. The IRS has been petitioned by numerous entities requesting more guidance on how “high risk professions” will be treated when calculating aggregate value, excise tax and other issues. We are awaiting this technical guidance from the IRS.

      –Ohio PERS

      Reply
  • July 30, 2015 at 3:12 pm
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    What about the higher threshold for “high risk” retirees ?

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    • August 3, 2015 at 9:38 am
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      Bill,

      We are aware of this issue and are awaiting technical guidance from the IRS on it.

      –Ohio PERS

      Reply
  • July 30, 2015 at 3:17 pm
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    With all the above questions, why do you still insist on starting it two years before it is federally required. No other states’ retirement systems are doing it two years early, why opers.

    Reply
    • August 3, 2015 at 9:45 am
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      Bill,

      If we wait until 2018 to begin reducing our plan cost, it would be a huge shock to our retirees when we had to make that adjustment. So we made some changes to the 2016 plan design to keep costs about the same. They include increased office visit and drug co-pays, and an increased annual deductible.

      –Ohio PERS

      –Ohio PERS

      Reply
      • August 7, 2015 at 9:52 am
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        Please explain how the cost would be any higher starting it in 2018 as federally required or in 2016. Please name any other states’ retirement systems that are starting this 2 years early. I can’t find any!!!!! Also as was asked before, will opers refund our money if it is amended or repealed prior to 2018?

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        • August 11, 2015 at 12:33 pm
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          Bill,

          IF the threshold remains at $10,200, we would have to make more-drastic changes in 2018 to stay under that amount of plan value because of the rising costs of care between now and then. In order to keep that value flat, we have to cost-shift at the point of service.

          –Ohio PERS

          Reply
  • July 30, 2015 at 5:28 pm
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    A point that is often missed is that retirees cannot have a flexible spending account that exempt active employees from paying taxes on money used to pay premiums and medical co payments. This is a significant savings to active employees and is being denied to retirees. That should be changed.
    This point should be included in the OPERS argument to exempt health benefits from the Cadillac tax

    Reply
  • July 30, 2015 at 6:03 pm
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    The only plan that should have the Cadillac tax is what congress and the White House have. If we have to have reduced and rationed care, they should also. In case you and they forgot, they are supposed to be working for us!

    Reply
  • July 31, 2015 at 12:14 pm
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    Thank you OPERS for looking after your older retirees who will be hit with significant increases as a result of the Affordable Care Act ! We need to keep the OPERS health care system viable and affordable for ALL retirees in OPERS. We appreciate your diligence in keeping the system working, thank you !

    Reply
  • August 6, 2015 at 7:10 pm
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    Do I understand this logic correctly? OPERS is going to implement an increase to my health insurance costs and/or decrease the benefits of the health insurance plan before OPERS is required to do so. And the reason is I will be less shocked with the outcome in 2018 because I needlessly paid more in 2016 and 2017?

    Reply
  • August 7, 2015 at 7:21 pm
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    I must commend OPERS for looking out for the retirees, it is a shame that retirees are looked at as a lost tribe. I must say OPERS is making every effort to Keep us informed. Please as stated maybe compose a letter we can all sign.

    Reply
  • August 10, 2015 at 5:00 pm
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    Michael….de’javu’ again. We had a discussion about this before. Why make changes to the plan when you are lobbying to change the cadillac tax. Why do this as a “preparation” for something that may change, especially when many of the PERS retireants will actually turn 65 and become eligible for medicare before january 2018. It is just an unnecessary burden…..

    Reply
    • August 11, 2015 at 12:38 pm
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      Thomas,

      As we’ve said before, we are making these cost-shifts to the consumer in order to stay under the plan value as delineated in the Affordable Care Act. The experts are all telling us to prepare for the tax now, rather than wait until two years from now when remaining under that threshold of plan value would cause us to make drastic changes.

      –Ohio PERS

      Reply
  • August 18, 2015 at 12:18 pm
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    If you went back to offering three plan levels like you used to, would that allow you to average the plan costs to a level below the threshold and help you avoid the Cadillac tax?

    Many retirees would appreciate a choice in plans and costs like we used to have.

    Reply
    • October 7, 2015 at 2:43 pm
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      Spouse,

      Each plan would be rated on its own. At the level of coverage those plans used to have, none of them would pass the Cadillac tax issue. It’s not the number of plans that would keep us from hitting the tax, but the level of coverage. The only way to avoid the tax is to reduce the total cost of the plan.

      –Ohio PERS

      Reply
  • August 18, 2015 at 4:44 pm
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    You keep saying the threshold is 10,200 before the Cadillac tax kicks in, however, site after site I have looked at indicate that For pre-65 retirees and individuals in high-risk professions, the threshold amounts are currently $11,850 for individual coverage and $30,950 for family coverage, Now I have reviewed many sites and many say pre-65 retirees and (and I stress and) individuals in high-risk professions the limit is $11,850.00. I guess it is how you read it, I read it to mean those under 65 retirees. Just like the supreme court decided that a State system did not need to be a State system to qualify for subsidies maybe this doesn’t mean what it says either. Other site indicates, In addition, although retirees not covered by Medicare who are fortunate enough to get health-insurance coverage from their employers would be subject to higher thresholds of $11,850 for individual plans and $30,950 for family plans Please clarify, if any clarification can be made of this broken system.

    Reply
  • September 25, 2015 at 2:17 pm
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    CONGRESS NEEDS TO PASS A LAW THAT SENIORS SHOULD BE EXEMPT. WE CAN ALL THANK OBAMA FOR THE MESS WE NEED A LAW THAT CONGRESS CAN NOT ACT A LAW THAT HARRY HEID HAD THE CONGRESS EXEMPT FROM OBAMA CARE. pUT THE 700,000 MILLION BACK IN MEDICARE.

    Reply

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