AT&T to Take $1 Billion Charge for Health Care

Original Post: NY Times

AT&T said Friday that it would take a $1 billion noncash accounting charge in the first quarter because of the health care overhaul and that it might cut benefits it offers to current and retired workers, The Associated Press reports.

The charge is the largest disclosed so far. Earlier this week, AK Steel, Caterpillar, Deere and Valero Energy announced similar accounting charges, saying the health care bill that President Obama signed into law on Tuesday would raise their expenses. On Friday, 3M said it would also take a charge of $85 million to $90 million.

More from The Associated Press:

All five companies are smaller than AT&T, and their combined charges are less than half of the $1 billion that AT&T is planning. The $1 billion is a third of AT&T’s most recent quarterly profit. In the fourth quarter of 2009, the company earned $3 billion on revenue of $30.9 billion.

AT&T said Friday that the charge reflected 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.

The White House spokesman, Robert Gibbs, said 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 have spent.

AT&T said that it was also looking into changing the health care benefits it offers because of the law. Analysts say retirees could lose the prescription drug coverage provided by their former employers as a result of the overhaul.