AT&T says health care law will cost it $1b

Bloomberg News / March 27, 2010

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SAN FRANCISCO — AT&T Inc. will book $1 billion in first-quarter costs related to the health care law signed this week by President Obama, the most of any US company so far.

A change in the tax treatment of Medicare subsidies triggered the noncash expense, and the company will consider changes to the benefits it offers current and retired workers, AT&T said yesterday in a regulatory filing.

AT&T joins Caterpillar Inc., AK Steel Holding Corp., and 3M Co. in recording noncash expenses against earnings as a result of the law. Health care costs may shave as much as $14 billion from US corporate profits, according to an estimate by benefits consulting firm Towers Watson.

AT&T previously received a tax-free benefit from the government to subsidize health care costs for retirees, who would otherwise be on a Medicare Part D plan. Under the new bill, AT&T will no longer be able to deduct that subsidy.