In Port News 28/05/2015
The U.S. West Coast port labor contract ratified by dockworkers will require shipping companies and terminal operators to cover the tax on high-cost health plans beginning in 2018 under the Affordable Care Act, widely called the “Cadillac tax.”
Health care benefits were an important part of the negotiations that culminated in an agreement in February and last week’s vote by the cargo handlers in favor a five-year contract that included wage increases, pension upgrades and substantial health care coverage.
Under the contract, the Pacific Maritime Association, a group of port terminal operators and shipping companies, will provide full health care benefits for members of the International Longshore & Warehouse Union, their dependents and retirees including full coverage with no premiums, no in-network deductibles or co-pays, $1 prescriptions and 100% coverage of hospital care.
In providing such coverage, PMA also will be on the hook to cover the sizable new tax on high-cost health plans required under the national health care law beginning in 2018. The tax amounts to 40% of the value by which employer-sponsored health plans exceed a government-set threshold.
Many companies are expected to try to keep the cost of health care plans under the government threshold to avoid triggering the additional tax. But members of the PMA don’t have that option under the terms of the new contract.
The plan costs PMA members about $35,000 per worker, according to the association—well above the thresholds established by the government ($10,200 for individuals and $27,500 for family coverage). PMA says the Cadillac tax will cost their members an additional $60 million in tax liability in 2018 and beyond. The contract is set to expire in July 2019.
In an emailed statement, a PMA spokesman said the new contract “improves earlier changes to the health care plan that foster greater efficiency, cost containment and fraud prevention,” and will actually result in savings for PMA members.
“Those savings are expected to reduce exposure to the Cadillac Tax to roughly $60 million a year, far less than the $150 million that was anticipated last year,” PMA Spokesman Steve Getzug wrote.
He added that PMA “will continue to closely monitor and manage the plan’s current and future costs, and anticipate ongoing savings that will reduce the Cadillac Tax further.”
In an email, ILWU spokesman Craig Merrilees said the union had no comment, “because we’re several years away from 2018.”
