Time & Attendance
Prevent Call Outs
Implementation & Launch
By Staff Report
Mar. 31, 2010
Boeing Inc. said Wednesday, March 31, that it will take a $150 million charge against net earnings in the first quarter this year to reflect a change in the tax treatment of federal subsidies provided to employers that offer prescription drug coverage to Medicare-eligible retirees that is at least equal to Medicare Part D.
Under current law, the government provides tax-free reimbursement of 28 percent of employers’ retiree prescription drug expenses that fall within a certain range. But health care reform legislation signed into law this week by President Barack Obama will alter that tax treatment beginning in 2013.
While the tax-free subsidies will continue, employers receiving them no longer will be allowed to take a tax deduction for prescription drug expenses equal to the amount of the subsidy.
Under U.S. accounting rules, employers are required to immediately recognize the impact of such a change on their financial statements.
Boeing’s announcement came on the heels of several other charges announced by other U.S.-based companies. They include:
• AT&T Inc., which last week said it would take a noncash charge of about $1 billion.
• Deere & Co., which reported a $150 million charge.
• Caterpillar Inc., which reported a $100 million charge.
• Prudential Financial Inc., which reported a $100 million charge.
• 3M Co., which reported a noncash charge of up to $90 million.
• AK Steel Holding Corp., which reported a noncash charge of about $31 million.
• Illinois Tool Works Inc., which reported a $22 million charge.
• Valero Energy Corp., which reported a charge of $15 million to $20 million.
• Honeywell International Inc., which reported a $13 million charge.
• Goodrich Corp., which reported a charge of about $10 million.
• New York-based Allegheny Technologies Inc., which reported a $5 million charge.
Meanwhile, Verizon Communications Inc. said in an 8K filing last week that it is evaluating the impact of the legislation on its effective tax rate, “which may be material.”
General Electric Co. said it will not take an earnings charge in response to the legislation because it converted its retiree prescription drug benefits in 2009 to a Medicare-approved plan provided through a third-party administrator and is no longer receiving a federal subsidy.
In statements, all of the companies that took one-time charges said they will be taken in the first quarter of 2010.
Four companies—AT&T, Verizon, Caterpillar and Deere—already have been invited to testify next month at a hearing by the House Energy and Commerce Committee on the subject.
In reporting its $150 million charge, Boeing said the impact of the loss of the tax deduction was not contemplated in guidance that the Chicago-based aircraft manufacturer issued January 27, but said the guidance will be updated when its first-quarter results are released.
Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail firstname.lastname@example.org.
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