Story from the Wall Street Journal:
AT&T Joins in Health Charges
AT&T Inc. said it would take a $1 billion charge against earnings tied to the federal health-care overhaul, joining a number of other companies in reporting an impact from the bill signed into law this week.
The charges relate to prescription-drug benefits for retirees. Companies that provide this benefit, as AT&T does, receive a federal subsidy, plus they can deduct the value of this subsidy from their taxes. The health overhaul cancels the deductibility of the subsidy.
It’s for that reason that companies are taking a charge against earnings. They “have a stream of tax benefits that they are losing way out into the future,” said Roland McDevitt, director of health-care research at benefits consultant Towers Watson.
The charges are “noncash,” meaning companies don’t have to write a check. But ultimately their tax bills will be higher given the change in tax treatment of the drug-benefit subsidy.