Revamp of health care bitter drug for AT&T
By Barbara Ortutay |
March 29, 2010, Monday
|
Print Edition
Print Edition
UNITED States-based AT&T Inc will take a US$1 billion non-cash accounting charge in the first quarter because of the health care overhaul and may cut benefits it offers to current and retired workers.
The charge is the largest disclosed so far. Earlier last week, AK Steel Corp, Caterpillar Inc, Deere & Co and Valero Energy announced similar accounting charges, saying the health care law that President Barack Obama signed last Tuesday will raise their expenses. Last Friday, 3M Co said it will also take a charge of US$85 million to US$90 million.
All five are smaller than AT&T, and their combined charges are less than half of the US$1 billion AT&T is planning. The US$1 billion is a third of AT&T's most recent quarterly earnings. In the fourth quarter of 2009, the firm earned US$3 billion on revenue of US$30.9 billion.
AT&T said last Friday that the charge reflects changes to how Medicare subsidies are taxed. Companies say the health care overhaul will require them to start paying taxes next year on a subsidy they receive for retiree drug coverage.
White House spokesman Robert Gibbs said last Thursday that the tax law closed a loophole.
Under the 2003 Medicare prescription drug program, companies that provide prescription drug benefits for retirees have been able to receive subsidies covering 28 percent of eligible costs. But they could deduct the entire amount they spent on these drug benefits - including the subsidies - from their taxable income.
The new law allows companies to only deduct the 72 percent they spent.
AT&T also said it is looking into changing the health care benefits it offers because of the new law.
The charge is the largest disclosed so far. Earlier last week, AK Steel Corp, Caterpillar Inc, Deere & Co and Valero Energy announced similar accounting charges, saying the health care law that President Barack Obama signed last Tuesday will raise their expenses. Last Friday, 3M Co said it will also take a charge of US$85 million to US$90 million.
All five are smaller than AT&T, and their combined charges are less than half of the US$1 billion AT&T is planning. The US$1 billion is a third of AT&T's most recent quarterly earnings. In the fourth quarter of 2009, the firm earned US$3 billion on revenue of US$30.9 billion.
AT&T said last Friday that the charge reflects changes to how Medicare subsidies are taxed. Companies say the health care overhaul will require them to start paying taxes next year on a subsidy they receive for retiree drug coverage.
White House spokesman Robert Gibbs said last Thursday that the tax law closed a loophole.
Under the 2003 Medicare prescription drug program, companies that provide prescription drug benefits for retirees have been able to receive subsidies covering 28 percent of eligible costs. But they could deduct the entire amount they spent on these drug benefits - including the subsidies - from their taxable income.
The new law allows companies to only deduct the 72 percent they spent.
AT&T also said it is looking into changing the health care benefits it offers because of the new law.
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