Several discussions about the Collective Bargaining Agreements for the Town and also for the School Districts have mentioned a slightly higher rate of pay increase to make up for the fact that the Unions have agreed to “give backs” on health insurance to avoid the “cadillac tax”. We’ve all heard the term, but what does it mean?
The tax will require employers to pay a 40 percent levy, starting in 2020*, on the amount by which the total costs of health plans exceeds an annual limit of $10,200 for an individual and $27,500 for a family. Although it is not effective for several years, the Town gave the negotiating teams a mandate to reduce the Health Insurance plans to avoid the penalty in the out years.
The Town is far from alone. A survey of Fortune 1000 companies by a top benefits consulting firm, found that the majority of companies indicated that the looming excise tax is having a “moderate” or “significant” influence on benefits decisions.
The Unions represented in Articles 14, 15 and 16 as well as the Teachers’ Union on the School District ballots have agreed to the give-backs and their contracts are for three years. The Fire Unions (Articles 12 and 13) have not yet come to terms with the issue. That’s why they have a one-year agreement, to give everyone time to sort out the health insurance terms.
* Thanks to a commenter for flagging that we had outdated information. The implementation date was changed from 2018 to 2020 last December. This post reflected the new information as of 3/4/16.