Health Plan Retiree Coverage

[Guidance Overview] The ERISA Litigation Newsletter, September 2010
Excerpt:"[The] focus this month is on the Third Circuit's decision in In re Visteon, which held that Section 1114 of the Bankruptcy Code applies to all retiree benefits -- vested and unvested -- and, as a result, a plan must continue to pay unvested retiree benefits during the pendency of bankruptcy unless the bankruptcy court approves otherwise."(Proskauer Rose LLP)

HHS's New Secure Website for Early Retiree Reinsurance Program Applicants and Provides List of Approved Applicants
Excerpt:"Although HHS is still accepting applications, it is unclear whether the $5 billion appropriated for this program will last until 2014, so we encourage interested plan sponsors to quickly apply for approval and to submit their reimbursement requests as soon as they can."(Employee Benefits Institute of America)

New Ways for Local Governments and Nonprofits to Manage Retiree Benefits
Excerpt:"Right now, municipalities across America are confronting a multi-million-dollar problem. It could be a city or a town. A school district. A police or fire department. Or a hospital. With GASB 45 rules in effect now for all public employers, administrators need to measure and disclose their liability for'other postemployment benefits'(OPEB), which is to say, the cost of providing retiree medical, dental, prescription drug, life, and disability coverage."(Milliman)

Report Touts Employer Benefits of Employer Group Waiver Plan with Wrap-Around Secondary Plan
Excerpt:"Employers providing prescription drug benefits to Medicare-eligible retirees could enjoy'a potentially significant savings opportunity'with a particular plan configuration called EGWP + Wrap, according to a new PricewaterhouseCoopers (PwC) report. The [report asserts that the arrangement could potentially reduce employers'pre-tax cash cost by 20% or more below current levels under the Retiree Drug Subsidy program] and would not require a substantial change from the current drug benefit design from retirees'standpoint."(PLANSPONSOR.com)

Court Rules Terminated Employee to Receive $3M in Benefits After Company Refused Him Severance
Excerpt:"[The former employee] will get benefits he should have received since 2005, like early retirement, which includes a pension and lifelong health benefits. That's over $3 million in damages, including attorney's fees."(New Jersey On-Line LLC)

[Opinion] Retirees Younger Than 65 Will Get Short-Term Help with Health Costs Under Health Reform
Excerpt:"Planning accordingly means setting aside lots of money now to pay for what could be a hefty increase in health-care expenses in 2012 and 2013."(MarketWatch, Inc.)

HHS Announces Approved ERRP Applicants; New Resources Available for Employers (PDF)
2 pages. Excerpt:"Approximately 2,000 employers, state and local governments, educational institutions, non-profits, and unions have been accepted into the [Early Retiree Reinsurance Program] and will be able to receive reimbursements for early retiree claims this fall."(Hewitt Associates)

2,000 Employers and Unions Approved for Early-Retiree Health-Care Funds
Excerpt:"The applicants approved so far span a broad spectrum: Fortune 500 companies, small businesses, major unions, schools, local governments and nonprofit groups."(The Washington Post; free registration required)

[Guidance Overview] CMS Announces Medicare Part D Premium Amounts for 2011
Excerpt:"The national average Part D premium for Medicare prescription drug coverage will reach $32.34 in 2011, up from $31.94 per month in 2010, CMS estimates."(Mercer)

About 2,000 Employers to Draw Health Funds
Excerpt:"Almost 2,000 employers and unions will be eligible to submit retirees'medical bills for reimbursement by a $5 billion federal fund, the Obama administration will disclose Tuesday, suggesting the fund will be spread widely but thinly."(The Wall Street Journal)

[Opinion] Public Employee Pension Reforms Recipe for Disaster
Excerpt:"While many of the people, including the Daily News, calling for reform are acknowledging that private-sector workers have lost tremendous value on their retirement plans, incredibly they present that as a model for public-sector employees!"(Paul Weber in the Los Angeles Daily News)

Private Exchanges Have Potential to Breathe New Life Into VEBAs
Excerpt:"Caterpillar is one of many Fortune 500 clients of Extend Health, Inc., the country's largest private Medicare insurance exchange. . . . Founded in 2004, Extend Health'operates a private Medicare exchange that helps employers or firms provide insurance choices to their retirees to buy their own individual plans using funds in a health reimbursement arrangement,'says Bryce Williams, CEO of Extend Health."(Employee Benefit News)

Fact Check:ing San Diego on Retiree Health Care Reform
Excerpt:"Of the 10 fiscal reforms on the city of San Diego's November sales tax ballot proposition, reducing retiree health care costs is city's the biggest opportunity for savings."(voiceofsandiego.org)

Leeway Given in Early Retiree Reimbursement Applications
Excerpt:"Employers that did not use the U.S. Postal Service to send in their applications to participate in a new early retiree health care reimbursement program will not be required to submit a new application, the Department of Health and Human Services said."(Business Insurance)

The New Health Care Law and Early Retirees
Excerpt:"I am age 58 and retired. I understand the new reform law helps employers offer health care coverage to their early retirees. What do I need to do to get this coverage?"(AARP Bulletin)

[Guidance Overview] HHS Relief for Incomplete Applications to the Early Retiree Reinsurance Program
Excerpt:"HHS has provided three methods of correcting problems . . . ."(Wolters Kluwer)

Companies Reorganizing Under Chapter 11 Battle with Former Employees over Lifetime Health Benefits
Excerpt:"Companies that go through the Chapter 11 process maintain'they can simply no longer afford the costs to pay for retirees'health care and pensions'and they usually win when a fight brews over ending these contracts."(Henry J. Kaiser Family Foundation)

How Local Governments Are Addressing Retiree Health Care Funding (PDF)
15 pages. Excerpt:"The brief follows up on a 2009 survey in which 206 local governments indicated they were likely to adopt a long-term strategy to strengthen their retiree health care funding, including establishing a Section 115 trust (governmental); medical subaccount [401(h)]; or Voluntary Employee Beneficiary Association (VEBA) trust [501(c)(9)];issuing OPEB bonds; increasing the years of service for vesting for RHC;increasing the age at which RHC is available; terminating retiree health care for all new hires."(Center for State and Local Government Excellence)

[Guidance Overview] Update on Early Retiree Reinsurance Program; Relief for Incomplete Applications
Excerpt:"Applications filed incorrectly or incompletely as a result of the sponsor not having consulted the Frequently Asked Questions posted by the Department on June 29 will be identified and the Department will give the sponsor an opportunity to submit the required additional information as an attachment to the original application."(Deloitte)

Who Should Pay for the Trillion-Dollar Pension Gap?
Excerpt:"[G]iven that we've promised at least $1 trillion more in retirement benefits to public employees than we have put aside to pay for them, who should pay to make up the difference? Should it be the employees themselves who pay, through cutbacks to annual cost-of-living adjustments for current retirees or tweaks to benefits that those stillworking will receive?"(New York Times; free registration required)

How to Stay in The Retiree-Benefit Game
Excerpt:"Some companies have nixed group health-care coverage and are sending their former employees to exchanges to shop for plans."(CFO.com)

Nevada Slashing Health Benefits to State Workers
Excerpt:"Facing a $111.2 million shortfall to support existing benefits, the Public Employee Benefits Plan board voted Thursday for sweeping changes that will drastically reduce benefits for active state workers and retirees."(Nevada Appeal)

The New Class Warfare: Private Vs. Public Worker
Excerpt:"Over the last decade, politicians . . . who sought to reform public-sector benefits, particularly pensions, argued that promises made to government workers in economic boom times no longer were affordable. But the urgency was lacking. That has changed . . . ."(Los Angeles Times)

How Local Governments are Addressing Retiree Health Care Funding
Excerpt:"This new issue brief finds that the economy has slowed the ability of local governments to address long-term funding of their retiree health care obligations. The brief follows up on a 2009 survey in which 206 local governments indicated they were likely to adopt a long-term strategy to strengthen their retiree health care funding . . . ."(Center for State&Local Government Excellence)

[Guidance Overview] Centers for Medicare and Medicaid Services Updates HRA Coverage Reporting
Excerpt:"Among the issues addressed in the updated guide are references to changes in reporting for Health Reimbursement Arrangements (HRAs). CMS has removed all references from the updated guide that previously referred to reporting only for'free-standing'HRAs."(Fisher&Phillips LLP)

3rd Circuit Rules Bankrupt Employer Must Negotiate Retiree Health and Death Benefit Cuts
Excerpt:"Employers in bankruptcy cannot unilaterally reduce or terminate retiree health or death benefits, even if plan documents and SPDs reserve the right to do so, the 3rd US Circuit Court of Appeals has ruled."(Mercer LLC)

PricewaterhouseCoopers Issues a Study of the IASB's Proposal on Pension/OPEB Accounting
Excerpt:"PricewaterhouseCoopers (PwC) performed a study of the potential impact of the proposal, looking at 60 US and non-US companies and evaluating how their historical reported financial information would have been affected had they been applying the proposal in past years."(PricewaterhouseCoopers LLP)

Pension and OPEB Accounting: A Study of the IASB's Proposal
60 pages. Excerpt:"The International Accounting Standards Board (IASB) has proposed changes to its standard on employers'accounting for defined benefit pensions and other postretirement benefits. While the proposal is not the result of joint deliberations with the Financial Accounting Standards Board (FASB), both boards intend to eventually adopt a converged standard."(PricewaterhouseCoopers LLP)

[Guidance Overview] Elimination of Retiree Drug Subsidy Deduction Under Health Care Reform
Excerpt:"Employers that decide to retain retiree prescription drug benefits should ensure they incorporate the future tax liability of these benefits into their current and projected earnings. Employers that decide to eliminate retiree drug benefits should prepare for the likely negative responses and potential litigation associated with that decision."(McDermott Will&Emery)

[Guidance Overview] Terminable-At-Will Retiree Benefit Plans Still Subject to Procedure Required under Bankruptcy Code
Excerpt:"The Third Circuit's decision in Visteon marks an important development for debtors and their retirees. In finding that Section 1114 applies to retiree benefit plans terminable-at-will outside of bankruptcy, the court gave retirees a stronger voice in their former employer's bankruptcy than they would otherwise have."(Pepper Hamilton LLP)

[Guidance Overview] Third Circuit Extends Protection to Non-Vested Retiree Benefits (PDF)
2 pages. Excerpt:"On July 13, 2010, the United States Court of Appeals for the Third Circuit held that section 1114 of title 11 of the United States Code applies to all retiree benefits, even those that the plan sponsor could have terminated outside of bankruptcy. In In re Visteon Corp., et al, the Third Circuit broke with the conclusion reached by most courts that have addressed the issue."(Groom Law Group)

[Guidance Overview] Retirees'Bankruptcy Protection Act Trumps ERISA, 3rd Circuit Rules
Excerpt:"The 95-page decision from the 3rd U.S. Circuit Court of Appeals in In re Visteon Corp. promises to alter the playing field in big corporate bankruptcies by mandating compliance with Section 1114 of the Retiree Benefits Bankruptcy Protection Act without exception."(Law.com)

[Guidance Overview] Retirees'Bankruptcy Protection Act Applies Over ERISA, According to Federal Appeals Court
Excerpt:"In a ruling that will apply to all types of retiree employee benefits, a federal appeals court has ruled that a corporation in bankruptcy may not terminate retiree health and life insurance plans unless the company can show that terminating a plan is a necessary part of its reorganization."(John V. Tucker and Tucker&Ludin, P.A.)

[Guidance Overview] Visteon Must Follow the Rules before Terminating Retiree Benefits
Excerpt:"The 3rd U.S. Circuit Court of Appeals has reversed lower court rulings that Visteon Corp. can terminate retiree benefits during bankruptcy."(PLANSPONSOR.com)

Handful of States, Now or in the Future, Will Require Their Public Retirees to Pay Full Cost of Health Insurance Premiums
Excerpt:"For state policymakers who must wrestle with the numbers, a common analogy surfaces. States'unfunded pension and retirement promises, many lawmakers believe, are similar to the generous employee perks that eventually helped drive Detroit automakers into bankruptcy. States, however, cannot declare bankruptcy in a legal sense. They must raise taxes or cut programs instead."(The Pew Charitable Trusts)

[Guidance Overview] Final Application and FAQs for Early Retiree Reinsurance Program (PDF)
4 pages. Excerpt:"BUCK COMMENT. In identifying the plan for purposes of the application, a plan sponsor will need to coordinate carefully any actions that are being considered in implementing'retiree-only plans'to avoid health reform market mandates."(Buck Consultants)

District Court Rules for Retirees on Health Benefits
Excerpt:"The SPD stated that the company'hoped'to continue the benefits indefinitely but reserved the right to change the payments at any time. Jonker declared in his ruling:'This language is not an unqualified statement that the employer retained the unilateral right to amend and terminate the plan.'"(PLANSPONSOR.com)

The 10 Most Common Retirement Benefits
Excerpt:"Retirement benefits vary considerably by employer. Most large employers now provide a 401(k) or similar type of retirement account, but other valuable retirement perks including retiree health insurance and traditional pensions are declining."(U.S. News&World Report)

[Guidance Overview] Early Retiree Reinsurance Program Now Accepting Applications
Excerpt:"Using the June 29 PDF form on the HHS website, sponsors must mail completed paper copies to the address on page 2 of the application. An agency spokesman cautions that employers may want to check HHS's new FAQs before applying."(Mercer)

[Guidance Overview] HHS Announces Opening of Retiree Reinsurance Program, Posts New Guidance on HHS Website to Assist Applicants
Excerpt:"In an apparent attempt to reassure sponsors that they will not be locked out of the program because their applications are not filed immediately, the FAQs repeatedly state that all qualified applications will be accepted. While HHS retains the right to discontinue accepting applications if it appears that program funding is insufficient, the FAQs suggest that the Secretary will not stop accepting applications unless the program funding is actually spent before the program expires."(Employee Benefits Institute of America)

[Guidance Overview] New Guidance That Employers Should Evaluate Before Filing the Early Retiree Reinsurance Program Application
Excerpt:"HHS posted an ???important update??? on June 30 reporting that a new version of the official application had been posted that corrected small bugs in the original final version, and clarifying how applicants are to send their applications."(Towers Watson)

[Guidance Overview] The Retiree-Only Plan Exception: Is It Still Effective After Health Care Reform?
Excerpt:"In this Commentary, we discuss the law prior to [health reform, its effect], the Agencies'interpretation of the changes, and what the current state of affairs means for employer-sponsored group health plans."(Jones Day)

Employers'Initial Reaction to Health Care Reform: Retiree Strategy Survey (PDF)
3 pages. Excerpt:"[S]ix out of ten employers intend to evaluate their long-term retiree medical benefits strategy in the near future, and nearly half of these companies have already begun the evaluation process."(Hewitt Associates)

HHS Releases Application for Early Retiree Health Plan Reimbursements
Excerpt:"Under the Early Retiree Reinsurance Program, the government will reimburse employers for a portion of health care claims incurred by retirees who are at least age 55 but not eligible for Medicare, as well as by retirees??? covered dependents, regardless of age. . . . Applications for the subsidy, as well as fact sheets about the program, are available at www.hhs.gov/ociio/regulations/index.html#early_retiree."(Business Insurance)

HHS Begins Accepting Applications for Early Retiree Reinsurance Program
Excerpt:"The program provides an 80 percent subsidy for retiree claims of between $15,000 and $90,000 . . . ."(Capitol Hill Publishing Corp.)

International Accounting Standards Board Answers Questions on Proposed Changes to Accounting for Retirement Plans
Excerpt:"The IASB has published answers to frequently asked questions [on its proposed changes to employers??? accounting for defined benefit pension and retiree medical plans covering] the project???s scope, relationship to other IASB and FASB activities, key elements, transition and effective date."(Mercer LLC)

Tricare to Allow Civilian Employers of Military Retirees to Offer Cafeteria Insurance Plans
Excerpt:"Tricare is allowing civilian employers of military retirees to offer a cafeteria-style supplemental health insurance plan so that'workers who elect to use their Tricare Standard benefit can buy coverage conveniently and with pre-taxed dollars,'The Colorado Springs Gazette reports."(Henry J. Kaiser Family Foundation)

[Opinion] USPS Shouldn't Be Forced to Pre-Fund Retiree Benefits
Excerpt:"Why should the Postal Service be held to a different standard than are other employers when it meets its current retiree health obligations every year?"(The Washington Post; free registration required)

Employers Still Expect to Sponsor Health Plans Long Term
Excerpt:"Despite the multitude of [health reform] changes, many of which employers perceive as costly, contained in PPACA, 87% of employers believe their organizations will continue to offer health care benefits because they are critical to employee recruitment, retention, and remaining competitive."(Employee Benefit News; free registration required)

ERIC Urges Fair Process In Administering Early Retiree Reinsurance Program
Excerpt:"ERIC's letter expresses concern with the approach to reimbursement specified in the interim final regulation because such a method could result in much of the $5 billion available for the program being allocated to only a few large funds."(Wolters Kluwer)

[Guidance Overview] Health Care Reform Mandates Do Not Apply to Retiree-Only Plans (PDF)
2 pages. Excerpt:"It seems that the Department of Health and Human Services (HHS) intends to also preserve the retiree-only exemption forinsured plans. The preamble states that, while the individual states have primary authority to enforce the PHSA over group and individual health insurance issuers, HHS is encouraging States not to apply the new mandates of the PHS Act to issuers of retiree-only plans or of excepted benefits."(Seyfarth Shaw LLP)

[Guidance Overview] Centers for Medicare and Medicaid Services Guidance on Mandatory Medicare Secondary Payer Reporting of HRA Coverage (PDF)
2 pages. Excerpt:"Information about HRA coverage must be submitted by Responsible Reporting Entities . . . starting in the fourth quarter of 2010."(Buck Consultants)

[Official Guidance] Text of'Plain Language Supplement'of GASB's Preliminary Views on Reporting and Accounting for Pension Obligations
19 pages. Excerpt:"This document is a plain-language supplement to the Preliminary Views, Pension Accounting and Financial Reporting by Employers, issued by the Governmental Accounting Standards Board. This supplement is prepared for citizens, taxpayers, elected representatives, municipal analysts, and other external users of governmental financial information and contains a minimum of technical terminology. The supplement references the Preliminary Views and should be read in conjunction with it."(Governmental Accounting Standards Board)

[Official Guidance] Text of Governmental Accounting Standards Board's'Preliminary Views'on Reporting and Accounting for Pension Obligations
51 pages. Excerpt:"The objective of this Preliminary Views is to present the Board's current views on what it believes are the most fundamental issues related to employer recognition and measurement of pensions in order to obtain comments from constituents before developing more detailed proposals for changes to existing standards. The views put forth in the chapters that follow generally are discussed as principles or concepts rather than as detailed potential requirements."(Governmental Accounting Standards Board)

As Insurers Prepare for Health Law's New Customers, Other Sections of Reform Take Action
Excerpt:"Consultants are pushing big companies to apply quickly for money from a $5 billion fund to help cover retiree health costs as part of the new health law, The Wall Street Journal reports."(Henry J. Kaiser Family Foundation)

[Guidance Overview] Early Retiree Reinsurance Program: Draft Application, Draft Instructions, and FAQs (PDF)
4 pages. Excerpt:"The draft documents and FAQs provide some helpful information that plan sponsors should use to begin preparing their applications . . ."(Morgan, Lewis&Bockius LLP)

[Guidance Overview] HHS's Proposed New Recordkeeping System for the Early Retiree Reinsurance Program (PDF)
3 pages. Excerpt:"The notice discusses the categories of individuals covered by the [new System of Records (SOR)], categories of records that will be maintained in the system, routine uses of records in the system, and privacy policies and practices regarding the data."(Hewitt Associates)

[Opinion] Funding State Retirement Benefits on $75 a Month: A Multi-Pronged Approach Can Slash Retiree Medical Costs
Excerpt:"[T]he nation's worst financial problem with public employee retirement plans is their retirement medical benefits. Pension funds have used actuarial principles for 60 years in most states, but fewer than 5 percent of public employers nationwide have even bothered to create a qualifying irrevocable trust to fund their'OPEB'(other post employment benefits) for retirees'medical needs -- let alone fund them."(Governing)

[Guidance Overview] Employer Reimbursements for Early Retiree Medical Claims Application Now Available (PDF)
2 pages. Excerpt:"The application to participate in the reinsurance program and FAQs about the program are now available at: http://www.hhs.gov/ociio/regulations/index.html."(Holme Roberts&Owen LLP)

[Opinion] Hewitt Associates Comments on Early Retiree Reinsurance Program
Excerpt:"The ERRP application requires that a plan sponsor indicate how it will use the reimbursement to maintain its level of contribution to the applicable plan. Hewitt asked for clarification regarding: 1) what it means to'maintain the level of contribution'; and 2) what to do with proceeds if not used within one year."(Hewitt Associates)