For employers who elected to continue prescription drug coverage for their retirees upon the introduction of Medicare Part D, pending “reform” legislation contains a timebomb for the employer and retired employees.
Employers who elected to continue this benefit receive a tax free 28% rebate of the claims incurred by retirees. Under pending legislation this rebate becomes taxable.
While at first glance this may appear no big deal, the way the rules work in terms of deferred tax accounting there is an immediate impact on earnings. The impact can be significant. I talked to one employer where 2010 earnings would be wiped out. Another would see earnings drop by five cents a share.
The other major negative is that employers may be inclined to drop or radically change retiree drug benefits, therby raising retiree out of pocket costs and in the process SHIFTING MORE COSTS TO THE FEDERAL GOVERNMENT which is exactly what the rebate was intended to prevent.
And you think Congress won’t change it’s mind when it comes to health care reform.
If there is one thing that may encourage you to get involved and speak to your representatives in Congress this should be it.
Blogsurfer.us
Recent Comments