Corporate America is wasting no time rethinking retirement plans for their employees — this on the heels of news that AT&T plans charges in the neighborhood of around $1B for healthcare. The writedown is by no means the only occurrence of corporate response to the recently passed reform law, but it is the largest. Essentially, a loophole in the 2003 Medicare Modernization Act imposed during the GWB admin allowed corporations a tax deduction to cut the cost of drug-benefit programs for retired workers. The issue at this time is whether some corporate entities will cut these benefits completely.

Gone is the federal subsidy that corporations would receive as a deduction on taxable income if their retired workers took part in pharma benefits. The value of this subsidy is around $1300/beneficiary. Perhaps the biggest news item here is what hay the GOP can make of this as a campaign issue this November. What say the Dems to all of this? Small businesses will reap greater federal subsidies to cover employees and that, over time, the reform legislation will become “increasingly popular”. | LINK

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