Deere & Co. says new health care reform law will increase fiscal 2010 expenses by about $150M
By APThursday, March 25, 2010
Deere says health care law will raise expenses
OMAHA, Neb. — Deere & Co. said Thursday that changes to the health care law signed into law this week will raise related costs this year by $150 million.
The biggest U.S. maker of farm equipment became the second major company in as many days to say it would take a charge for fiscal 2010.
Deere and Caterpillar Inc., which reported that it would record a $100 million charge Wednesday, say the health care overhaul President Barack Obama signed Wednesday will make a subsidy the companies receive for retiree drug coverage taxable in 2011.
Both companies said it was a one-time charge as they adjust to the new level of expected taxes.
Deere and Caterpillar were among the 10 companies that sent a letter to Congressional leaders in December warning of cost increases. Others were: Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon, Xerox Corp., Public Service Enterprise Group Inc., and Met Life Inc.
The companies say federal subsidies have covered 28 percent of the cost of retiree prescription drug coverage. The government offered the subsidies so that more companies would continue to offer coverage to retirees and keep them off of government-funded Medicare Part D.
Under the health care reforms passed this week, that subsidy will be taxed starting next year, which the companies predicted could significantly increase government health care costs because companies may drop coverage.
“Taxing the subsidy means that more companies will eliminate or reduce the coverage, and more retirees will shift to Medicare Part D, which will creare more cost for both the government and the retirees,” the companies wrote in their letter.
Deere spokesman Ken Golden said it would be premature to comment on whether this tax change will affect what benefits Deere offers to retirees in the future.
But Golden said Thursday that since the health care law has been signed, companies have to account for a known future cost.
A technical snag had lawmakers scrambling to fix the final piece of legislation Thursday, though leading Democrats say they do not expect any major problems.
Deere, based in Moline, Ill., said it expects to record most of the $150 million charge in its second quarter, and its 2010 earnings forecast of about $1.3 billion did not account for the expense hike.
Caterpillar also said the tax-law change is not reflected in its 2010 profit outlook of about $2.50 per share.
Tags: Access To Health Care, Barack Obama, Government Programs, Government-funded Health Insurance, Health Care Costs, Health Care Reform, Health Issues, Illinois, Moline, North America, Omaha, Political Issues, United States
