UPS says healthcare rules no biggie…

August 17, 2010

You may remember back in March, shortly after the health care reform legislation was passed, that a small company called AT&T (T) made a big splash by announcing plans to take a $1 billion charge to cover the cost of the new regulations. Soon after, several other companies followed suit. The basic reasoning for the charges was that under reform, the government was eliminating a big tax break for providing prescription drug coverage to retirees.

So you can imagine our surprise — shock even — as we were flipping through United Parcel Services’ (UPS) recent 10-Q and came across this statement:

The enactment of the —Patient Protection and Affordable Care Act and —The Health Care and Education Reconciliation Act of 2010 in 2010 will bring significant changes to the U.S. health care system. The legislation eliminated the tax deductibility of Medicare Part D subsidies for retiree prescription drug coverage; however, this impact was not material to our financial results.

Whoa, Bessie, we thought. How could a company like AT&T need to take a $1 billion charge and a company like UPS deem the very same reform not material? While the two companies are by no means identical, there certainly are enough similarities in their workforce: both have large groups of retirees who were represented by unions.

We’re not calling AT&T a liar here — at least not as long as our Iphone is still under contract — though we did debunk the charges in a footnotedPro post back on April 1. But it does seem a bit odd that the very same legislation would result in a $1 billion charge at one company and not be material at the other.

Image source: Davies & Starr

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