I feel so bad for the corporations, the way I read this is a loop hole was closed that the coporations were s@cking off the gov's hind t@@t for prescription drugs for retirees.
$150 million cost tied to health law, Deere says
By DAN PILLER •
[email protected] • March 26, 2010
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Buzz up!Twitter FarkIt Type Size A A A Deere & Co., Iowa's largest manufacturing employer, said Thursday that the new health care law will cost it $150 million after taxes this year.
Deere, Caterpillar and others have warned that a new tax on retiree drug coverage "would negatively impact both retirees and companies."
White House spokesman Robert Gibbs, traveling with President Barack external_link on Thursday in Iowa City, said the law "closes a loophole that was created in the Medicare Part D prescription drug benefit."
The health care bill imposes a tax on subsidies corporations receive on 28 percent of their retiree prescription costs under a 2003 Medicare bill.
"The 2003 legislation encouraged companies to stay in the game and continue to fund their retirees' prescriptions," Deere spokesman Ken Golden said. "Otherwise, the retirees would go onto the Medicare prescription program, which would cost the government more money."
Golden said the charge to second-quarter earnings would be taken as a one-time cost. The impact of the legislation had not been included in its forecast for a profit of $1.3 billion for this year.
Deere's stock dropped 29 cents per share to $60.20 Thursday on the New York Stock Exchange.
Another employer in Iowa, Valero Energy of San Antonio, will take a $15 million to $20 million charge to second-quarter earnings for the same reason, Valero spokesman Bill Day said Thursday.
Valero owns ethanol refineries at Albert City, Charles City, Fort Dodge and Hartley.
This week, Caterpillar of Peoria, Ill., said it would take a $100 million charge to second-quarter earnings to cover the new tax.
In its filing with the U.S. Securities and Exchange Commission, Caterpillar referred to the health care law as a "tax increase."
"Although this tax increase does not take effect until 2011, Caterpillar is required to recognize the full accounting impact in its financial statements in the period in which the act is signed," the filing said.
Deere, Caterpillar, Verizon and other big employers had protested the proposed tax in a letter to Senate Majority Leader Harry Reid, D-Nev., and House Speaker Nancy Pelosi, D-Calif., on Dec. 11.
"The change would make the 28 percent subsidy taxable to employers, effectively reducing the value of the subsidy," the letter said.
"Taxing the subsidy means that more companies will eliminate or reduce the coverage and more retirees will shift to Medicare Part D, which will create more cost for both the government and retirees," the letter said.
The letter also was signed by Boeing, Con-Way, Exelon, Met Life, Navistar, Public Service Enterprise Group and Xerox.
Golden said the fact that external_link traveled to Iowa City on Thursday to discuss the health care law "was not a factor in the timing of the announcement."