Benefits Law Update
        Practical advice from Verrill attorneys

        Early Retiree Reinsurance Program Under Health Care Reform Begins Today

        June 1, 2010

        The Early Retiree Reinsurance Program (ERRP) is a limited-time program through which employers sponsoring employment-based early retiree medical plans may receive reimbursements towards the cost of providing benefits to retirees aged 55 to 65, their spouses, surviving spouses, and dependents. Created under the Patient Protection and Affordable Care Act, the ERRP is meant to be an incentive for employers to maintain early retiree benefits until the Health Insurance Exchanges become operational in 2014, and any employer who sponsors an early retiree medical plan should seriously consider applying for ERRP funds.

        The ERRP will reimburse eligible employers (or other plan sponsors) for up to 80% of the cost of qualified claims between $15,000 and $90,000 incurred per person per plan year. For calendar year plans, the first eligible year is the January 1, 2010 plan year, but claims paid before June 1, 2010 will only count toward meeting the $15,000 threshold (and will not be eligible for reimbursement).

        To be eligible for ERRP reimbursement an early retiree medical plan must be “certified” by HHS before filing claims for reimbursement. Among other eligibility requirements, plans must have in place programs and procedures to generate cost savings for participants with chronic and high-cost conditions, as well as policies and procedures to detect and reduce fraud, waste, and abuse. Reimbursements must be used to reduce health benefit premiums or costs for the employer and/or participants and cannot be used to supplement general revenues. Employers must maintain their pre-ERRP levels of early retiree premium support while participating in the ERRP. Certification lasts the length of the ERRP, so employers will not need to reapply each year.

        The ERRP will provide reimbursements until January 1, 2014 or until its $5 billion fund is exhausted, whichever comes first. Because the $5 billion is not expected to be sufficient to pay all submitted claims, employers should act quickly in applying for and submitting claims to the ERRP. Applications and reimbursements will be processed in the order received, and applications will be available in late June.

        More detailed information can be found in the Department of Health and Human Services interim final rule on the ERRP.

        Benefits Law Update

        Verrill’s Benefits Law Update blog delivers timely insights and practical guidance on the ever-evolving landscape of employee benefits and executive compensation. Our blog provides up-to-date analysis and commentary on a wide range of topics, including timely updates on developments in law affecting employee benefit plans and executive compensation arrangements.

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