January 8, 2004
U.S. Drug Subsidy
Benefits Employers
By ELLEN E. SCHULTZ and THEO FRANCIS
Staff Reporters of THE WALL STREET JOURNAL
Some companies with many retired workers are expected to post big earnings gains for 2003 or 2004, thanks to accounting guidelines for subsidies under the federal prescription-drug program.
When Congress approved prescription-drug benefits for Medicare recipients last year, it granted benefits for the 65% of large employers with retiree health-care plans, providing funds for companies that maintained their prescription-drug coverage for retirees.
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The subsidy won't be paid for another two years, but the Fianancial Accounting Standards Board of Norwalk, Conn gave permission yesterday for companies to book the value of their anticipated government payments in 2003 financial statements, if they believe they can accurately predict the effect of the subsidy.
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So if an employer and a retiree each pay $1000 toward the retiree's medical costs, the employer subsidy is caluclated in the full $2000, bringing the company a total subsidy of $490, rather than the $210 that it would get if it received a subsidy only on its share.
Only in America....it goes on and on...and gets more detailed. This was a "corporate gift" from bush.... period.
http://online.wsj.com/article/0,,SB107350927860976500,00.html?mod=home%5Fwhats%5Fnews%5Fus
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