Manufacturer Blames Health Tax Proposal for 401(k) Match Cut

January 8, 2009 ( the prospect looming of the imposition of a federal medical device tax, an Elyria, Ohio, home-health products firm has suspended its 401(k) match and taken other cost-cutting measures.

A news report on the Web site said the company has also stopped management merit-pay hikes and imposed a hiring freeze because of the financial impact of the potential levy to be imposed as part of ongoing Congressional health-care reform efforts.

The news account said Invacare is warning that the tax could lead it to increase prices, shift more production overseas, reduce employee benefits, and cut research and development expenditures, according to a regulatory filing. The tax could result in an annual “impact” between $12 million and $14 million to the company.

The House and Senate passed different version of the tax in their health-overhaul bills. The Senate’s version would impose a sales-based tax on device firms that’s intended to raise $2 billion annually beginning in 2011, and $3 billion beginning in 2017. The tax would not be deductible by the manufacturer and the amount of tax payable by a manufacturer would be determined based on market share, Invacare said. The House’s version calls for a smaller tax on device makers.

The company’s regulatory filing is available here