The Health Care Reform bill recently signed by President Obama has eliminated a tax benefit for corporations which pay for their retirees prescription drug costs. Formerly, corporations where allowed to deduct the expense relating to the prescription drug cost and received a subsidy on top of this for keeping their retirees out of the Medicare Part D program. Now, only the unsubsidized portion of the expense deductible. The 28% subsidy remains in the current law.
The New York Times reports on this. It will be interesting to see what happens. The change in the treatment of the taxability of the subsidy doesn’t kick in until 2013, I believe. I would suspect that corporations will re-evaluate their retiree’s prescription drug options at that time.
Ultimately, this will likely result in more retirees who currently get their prescriptions from their former employer being moved into the individual market and shopping for a Medicare Part D plan.