Financial Executives International President and CEO Issues Statement on Medicare Part D Subsidy

MORRISTOWN, N.J., April 6 /PRNewswire/ -- Marie Hollein, President and CEO of Financial Executives International (FEI), the professional association of choice for senior-level financial executives, issued today the following statement to Congressional leadership to address Section 9012 of the Patient Protection and Affordable Care Act (PPACA):

The Patient Protection and Affordable Care Act (PPACA) recently passed by Congress and signed by President Obama is a historic measure.  We are hopeful that some of the bill's provisions will slow the increases in health care costs, as the trend of cost increases is unsustainable for employers, employees, and the general public.  The law's tax treatment of the Medicare Part D Subsidy found in the PPACA, however, has introduced a significant change in the economic consequences for companies that offer prescription drug coverage to their retired employees.   

The PPACA denies an employer's deduction to the extent of the federal subsidy received.  Companies are required by Statement of Financial Accounting Standards No. 109 (now Accounting Standards Topic 740) to adjust deferred tax assets and reduce net income from continuing operations in the period in which PPACA was enacted to reflect the change for all future years. As a result, some companies have already publicly reported a charge to their bottom line that ranges from $10 million to $100 million and a smaller group of companies are facing an even larger impact – some up to $1 billion.

As an organization that specializes in accounting policy and financial reporting, FEI can confirm that these accounting consequences are real and immediate, and the revelations of the impacts of this particular provision are based on sound accounting policy.  It is critical to understand that senior financial executives are required to base their financial statements upon standards promulgated by standards setters and regulators to ensure transparency and to make all stakeholders informed about their company's financial position.  

Since 1931, FEI has worked to advance the success of senior financial executives through integrity and ethical leadership. Our members work to provide to third parties information about their companies that remains free of bias and inconsistencies.  Thus, FEI is perplexed by the adverse commentary on companies' issuance of 8-Ks and public statements disclosing the financial consequences of the change in law.  This prudent disclosure of the real impact of this provision is a required application of Generally Accepted Accounting Principles (GAAP) to financial statements.  

About FEI

Financial Executives International is the leading advocate for the views of corporate financial management.  Its 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers.  FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications.  Members participate in the activities of 85 chapters, 74 in the U.S. and 11 in Canada. Visit www.financialexecutives.org for more information.

SOURCE Financial Executives International (FEI)