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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
from Spencer’s Benefits Reports: Most companies that offer pre-65 retiree medical benefits intend to apply for the Early Retiree Reinsurance Program, a provision in the Patient Protection and Affordable Care Act that goes into effect June 1, 2010, according to a new survey from Hewitt Associates. The early retiree program was established to offset a portion of health care claims costs for retirees ages 55 to 64 and their families.
Seventy-six percent of the 245 large employers Hewitt surveyed that offer medical benefits to more than 1.3 million retirees plan to pursue reimbursement under the early retiree program. Under the new program, companies may be reimbursed 80% for claims amounts between $15,000 and $90,000 incurred over the course of a year by early retirees and their dependents. Eligible claims include medical, prescription drug, and behavioral health. The early retiree program will last until Jan. 1, 2014, or until the $5 billion set aside for the program is exhausted.
According to Hewitt estimates, the average federal reimbursement will amount to between $2,000 and $3,000 per pre-65 retiree per year, or approximately 25% to 35% of total health care costs. For example, a company that covers 1,000 early retirees could receive $2 million to $3 million in reinsurance payments per year.
“The number of employers eliminating pre-65 retiree medical benefits has grown over the past decade as health care costs continue to rapidly increase,” said Milind Desai, senior consulting actuary and co-leader of Hewitt’s Retiree Health Care Task Force. “The early retiree reinsurance program encourages employers to continue offering coverage to pre-65 retirees and their families by providing some temporary relief from expensive pre-65 retiree medical claims. But because so many companies plan to apply for the early retiree program, employers will need to act quickly to secure a share of the proceeds, since the federal funds earmarked for this program are limited.”
Although the law requires employers to use the early retiree program reimbursements to reduce the cost of the plan, most have not yet decided on a specific approach. Hewitt’s survey was conducted just as the Department of Health and Human Services (HHS) issued interim final rules with additional guidance for the early retiree program. At that time, two-thirds (66%) of companies that intend to apply for the reimbursement said they were unsure about how they plan to use the proceeds and were waiting for this guidance before making a decision. Sixteen percent said they were considering using the reimbursement to reduce premiums—including both employer and retiree share, and another 5% said they were considering reducing the retiree share of premiums only.
“While the interim final rule on the early retiree program was released in early May, most employers are still looking for more details about how these funds can and cannot be used,” said John Grosso, senior consulting actuary and co-leader of Hewitt’s Retiree Health Care Task Force. “We expect additional guidance by the end of June, and we believe companies will then make final decisions on how to best allocate these reimbursements to offset the cost of the plan. Employers will be required to describe how the proceeds will be used to support the plan in their early retiree program application.”
For more information, visit http://www.hewitt.com.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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