The Obama administration says employers may be exaggerating the effects of a Medicare Part D drug program subsidy tax change included in the new Patient Protection and Affordable Care Act.
“I think this has maybe been framed as a lot more than meets the eye,” White House Press Secretary Robert Gibbs said Tuesday during a White House press briefing.
PPACA, the new health system change law based on H.R. 3590, now requires affected employers to deduct the 28% federal retiree drug benefit plan subsidy payments from their health expense deduction.
The government will not tax the subsidy directly, but employers’ tax bills will increase as if they did have to pay taxes on the subsidy, according to PricewaterhouseCoopers L.L.P., New York.
Employers and groups that represent them, such as the American Benefits Council, Washington, say Congress gave employers the subsidy in the first place to keep them from dropping drug benefits and sending retirees to enroll in the Medicare Part D prescription drug plan. The subsidy saves the Part D program money, the benefits council says.
Accounting rules require publicly traded employers that get the subsidy to include a charge in their first-quarter earnings statements to reflect the effects of the tax change, the council says.
Several companies, including AT&T Inc., Dallas, and Prudential Financial Inc., Newark, N.J., already have announced plans to take Part D-related charges.