Retiree Drug Subsidy Deduction Eliminated
Employers that provide prescription drug coverage to Medicare-eligible retirees that is at least as valuable as the Medicare Part D benefit are eligible for a subsidy of 28% of allowable prescription drug claims. In effect, this subsidy has been tax-free for employers. However, beginning with the 2013 tax year, an employer's allowable deduction for retiree prescription drug expenses must be reduced by the amount of the tax-free subsidy payment received. (Which, in effect, means the subsidy is no longer tax-free for the employer.) The provision also had an immediate Financial Accounting Standard 106 accounting impact on date of enactment of the Health Care Reform legislation.
American Fidelity Assurance Company does not provide tax or legal advice.
