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CMS to Stop Accepting Early Retiree Reimbursement Applications

April 1, 2011
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Related Topics: Finance/Taxes, Benefit Design and Communication, Retirement/Pensions, Latest News
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The Early Retiree Reinsurance Program, or ERRP, will stop accepting applications after May 5 as the $5 billion program’s funds are being depleted rapidly, the Centers for Medicare & Medicaid Services said.

The program, created by the health reform law, partially reimburses employers and other organizations that have early retiree health care plans.

“We have projected the availability of program funding based on the rate at which appropriated funds are currently being used to reimburse plan sponsors, and we have concluded that we have approved a sufficient number of applications to exhaust the program funding,” the CMS said in a March 31 filing that is to be published in the April 5 Federal Register.

As of March 17, the CMS had approved applications submitted by nearly 5,400 plan sponsors and paid about $1.8 billion in reimbursements to about 1,300 plan sponsors.
Of the $1.8 billion distributed, $206.8 million, or more than 10 percent, was distributed to the United Auto Workers Retiree Medical Benefits Trust.

The trust is a voluntary employees’ beneficiary association, which was set up by the UAW under a 2007 collective bargaining agreement between General Motors Corp., Ford Motor Co., Chrysler and the UAW.

Under that agreement, the automakers agreed to contribute more than $50 billion to the Voluntary Employee Beneficiary Association plan. In return, the automakers no longer have to provide health care benefits to UAW-represented retirees and their dependents. The UAW is responsible for managing the VEBA and paying retiree health care claims.

Other big recipients of ERRP funds include:
• AT&T Inc., $140 million
• Verizon Communications Inc., $91.7 million
• Public Employees Retirement System of Ohio, $70.6 million
• Teacher Retirement System of Texas, $68.1 million
• Georgia Department of Community Health, $57.9 million
• California Public Employees’ Retirement System, $57.8 million
• State of New York, $47.9 million
• State of New Jersey Treasury Department, Pension Accounting Services Department, $38.6 million
• General Electric Co., $36.6 million
• Employees Retirement System of Texas, $30.2 million
• The commonwealth of Kentucky, $29.7 million.
Under the ERRP, the federal government reimburses plan sponsors for a portion of claims incurred starting June 1, 2010, by retirees who are at least age 55 but not eligible for Medicare, as well as covered dependents, regardless of age.
After a participant incurs $15,000 in health care claims in a plan year, the government will reimburse 80 percent of claims up to $90,000.  

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

 

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