Corporate America Forced to Pay Millions for Health Care Reform (NYSE:T),(NYSE:CAT),(NYSE:AKS)
AT&T (NYSE:T) has to cough up $1 billion, Caterpillar Inc (NYSE:CAT) is on the hook for $100 million and AK Steel Corp. (NYSE:AKS) will be hit with $31 million in charges. Part of the new healthcare law places a federal income tax on government subsidies given to companies that provide retirees and their spouses with drug benefit plans. The 28% subsidy was created as Medicare Part D, adding a prescription plan for senior citizens to the Medicare Act of 2003.
PAYING 6.3 MILLION AMERICAN RETIREES
Consulting firm Towers Watson & Co. (NYSE:TW) estimates these taxes could cost companies about $233 per person receiving drug benefits - a hefty price tag when a company gives benefits to 40,000 retirees, like Caterpillar.
Overall, more than 3,500 companies offer drug benefits to 6.3 million retirees. Although the tax won't be effective until 2011, accounting practices force companies to recognize the fees in the period in which the law is signed. That means the tax could nab $14 billion from corporate profits in a year when companies were hoping to recover from huge losses during the recession.
AT&T (T) is the hardest hit thus far, they will owe one billion dollars in the first-quarter thanks to the health-care law signed earlier this week by President Obama. The company said in a regulatory filing that the non-cash charge has been triggered by a change in the tax treatment of Medicare subsidies.
"As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health-care benefits offered by the company," the company said in the filing.
Here's how those stocks traded today:
|Ticker||Company||Price||Change||Chg %||Mkt Cap|
|AKS||AK Steel Holding Corp.||23.01||+0.52||2.31%||2.53B|