RDS Program Announces Subsidy Changes Coming in 2013

Share Article

The MMA (Medicare Modernization Act) of 2003 reimburses employers for a portion of their eligible expenses for retiree drug benefits through a 28% tax-free subsidy, which typically has been deducted from gross expenses. There is currently a loophole in the MMA which allows Plan Sponsors to deduct the value of this 28% tax-free subsidy twice - first they could exclude the 28% from their gross income, and then deduct it from their gross income for tax purposes.

News Image
“It is important to note that there are many Plan Sponsors who will not be affected by this change because they are not subject to a corporate tax,” says Jayne Brown, RDS Services’ Program Director. “These Plan Sponsors include state and local government

Please click here to read the legislation prepared by the Staff of the Joint Committee on Taxation.

Currently, RDS Program subsidies are excludable from the Plan Sponsor's gross income for the purposes of regular income tax. However, for taxable years beginning this December 31, 2012, the amount deducted for retiree prescription drug expenses must be reduced by the amount of the excludable subsidy payments received (i.e., Total Rx Gross Expenses minus Total RDS Subsidy Received).

RDS Services, LLC
RDS Services, LLC has provided comprehensive services to Plan Sponsors since 2005 when the RDS Program began. We are RDS Program administration, audit, and data mining experts and will handle your RDS Program application end-to-end. Call Jayne Brown at (888) 797-8274 for your risk-free assessment or visit us online at http://www.rdsservices.us.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Christine Kloka
Visit website