AT&T takes $1 billion health care reform charge

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- AT&T said Friday it will take a non-cash charge of about $1 billion for the current quarter in anticipation of costs resulting from the health care reform measure signed into law this week by President Obama.

In a filing with the Securities and Exchange Commission, the telecommunications provider said the charge is related to a part of the law that eliminates tax deductions for Medicare prescription drug subsidies.

When the Medicare prescription drug program was passed in 2003, it included a provision granting employers a subsidy of 28%, or up to $1,330, per retiree for prescription drug costs.

Even though the federal subsidies were already tax free, employers could still write them off on their income taxes, in addition to writing off their own contribution. The new law, signed by Obama on Tuesday, maintains the subsidy as a tax-free incentive to employers, but prohibits them from taking it as a deduction.

White House spokesman Robert Gibbs defended this change on Thursday, explaining that the previous law essentially allowed for two deductions - one for the employer's own contribution, and another for the tax-free federal subsidy.

"This bill, our bill simply closes the loophole and allows them to deduct that money one time by not counting it as income," Gibbs said.

Under the tax change, which Gibbs said won't go into effect until 2013, employers will still be able to deduct their own contributions to prescription drug costs.

AT&T (T, Fortune 500)'s news comes on the heels of similar announcements by Deere & Co. (DE, Fortune 500)and Caterpillar Inc. (CAT, Fortune 500) this week. Together, the industrial equipment companies expect to post $250 million in charges as a result of the smaller tax deductions.

In a letter to Congress in December, Deere, Caterpillar and eight other companies warned legislators of the cost increases. Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon Communications Inc., Xerox Corp., Public Service Enterprise Group Inc. and MetLife Inc. were included in the letter.

AT&T is also reviewing its health care benefits offered to both current employees and its retirees, the company said in its SEC filing. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,976.31 263.65 1.49%
Nasdaq 4,947.44 56.22 1.15%
S&P 500 2,086.24 25.22 1.22%
Treasuries 1.96 0.01 0.77%
Data as of 10:56pm ET
Company Price Change % Change
Bank of America Corp... 15.52 0.21 1.37%
Intel Corp 31.46 -0.54 -1.69%
Apple Inc 126.37 3.12 2.53%
Altera Corp 42.82 -1.57 -3.54%
Microsoft Corp 40.96 -0.01 -0.02%
Data as of 4:04pm ET
Sponsors

Sections

McDonald's will begin serving McMuffins and hash browns all day at certain locations in the San Diego area. More

Warren calls reports that big banks might withhold campaign dollars from Senate Democrats 'a serious threat' More

Jay Z brought out Alicia Keys, Beyonce, Kanye West, and more to announce Tidal -- his new streaming service owned by the artists themselves. More