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 ACA legislation.
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