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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: When retiree medical responsibilities are shifted to a voluntary employees’ beneficiary association (VEBA)-funded group health plan, and the VEBA wishes to claim the Medicare Part D retiree drug subsidy (RDS), the VEBA-funded health plan is considered to be a group health plan that is different than the plan from which the retiree medical responsibilities were transferred, according to new guidance issued by the Centers for Medicare and Medicaid Services (CMS). In such a case, because there is no change in ownership involved, the VEBA plan must submit a new application for the RDS under its own name and employer tax identification number.
CMS issued this guidance, entitled Transitioning RDS Retirees to a Group Health Plan That Uses a VEBA as a Funding Mechanism. If “the transition of retirees from the previous RDS plan sponsor occurs during that previous sponsor’s plan year, costs incurred by that sponsor cannot be carried over toward satisfying the [RDS] cost threshold and cost limit that applies to the new sponsor,” the CMS stated. The CMS considers this to be the case even if the VEBA plan sponsor’s retirees, benefits, and/or cost sharing are identical to those of the previous plan sponsor.
The CMS believed that it was necessary to issue this guidance in light of the current trend of employers sponsoring retiree medical benefits that stop providing the coverage and instead contribute to a VEBA trust established specifically to cover such benefits. This trend has arisen out of labor union agreements, bankruptcy, and litigation. For example, in 2007, the Detroit big three automakers negotiated an agreement with the United Auto Workers (UAW) to transfer responsibility for the companies’ retiree medical benefits to a VEBA that the UAW would establish. The automakers were to contribute funds to the VEBA. The CMS had been asked whether the VEBA sponsor could assume the previous sponsor’s RDS agreement for the balance of the plan year when the new VEBA sponsor takes over the retiree medical responsibilities in the middle of the RDS year. The CMS also was asked if the new sponsor of the VEBA could get credit toward meeting the RDS cost threshold and limits for prescription drug costs incurred by the previous plan sponsor for the earlier part of the year. The answer to both questions is “no.”
The CMS notes that the guidance does not “prohibit the two sponsors from negotiating an arrangement under which the sponsor of the VEBA-funded group health plan absorbs the retirees from the old RDS plan sponsor after the old sponsor’s RDS plan year has ended.”
For more information, visit http://www.cms.hhs.gov/EmployerRetireeDrugSubsid/.
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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