BENEFITS BYTE

January 14, 2004
BB 04—002

In this issue:

  • Kaiser/Hewitt Retiree Health Survey Issued
  • FASB Reverses Staff Position Regarding FAS 106 Accounting of Medicare Law
  • HHS Issues Medicare Message of the Day

Kaiser/Hewitt Retiree Health Survey Issued

On January 13, The Kaiser Family Foundation and Hewitt Associates released the report Retiree Health Benefits Now and in the Future. The survey, conducted between June and September 2003, provides detailed information on retiree health programs offered by large private-sector employers. The data in this survey reflect the responses of 408 large firms (private-sector employers with 1,000 or more workers) and provides information on eligibility, benefits, premiums, and total cost in 2003, and offers insights as to what changes employers say they are likely to make in the near future.

Among other findings, the report demonstrates that employers are continuing to cut back on health care coverage for their retirees, particularly for new hires and future retirees rather than current retirees whose coverage is more likely to continue. While some members of Congress fear that trend will be exacerbated by the recently enacted Medicare prescription drug law, the Employers' Coalition on Medicare (ECOM) issued a press release on January 14 that draws the opposite conclusion. According to ECOM Chairman Edward J. Kaleta of Caterpillar, Inc., "[n]ew incentives in the Medicare law will help keep employers in the mix of sponsoring health benefits to our nation's retirees. Without Medicare's recognition of the important role of employers in implementing the [Medicare] benefit, we likely would see this unfortunate trend [in declining retiree coverage] continue." The Council is a Steering Committee member of ECOM, which played a lead role during the Medicare debate in representing employer views on the new prescription drug coverage.

One of the primary benefits included for employers in the legislation was a new tax-free subsidy for employers that sponsor retiree prescription drug coverage equal in value to the new Medicare drug benefit. A summary of the new subsidy provisions is now available from the Groom Law Group. For more information, contact Maria Ghazal, director of health policy, at (202)289-6700.

FASB Reverses Staff Position Regarding FAS 106 Accounting of Medicare Law

On January 12, the Financial Accounting Standards Board (FASB) finalized the staff position it announced in December regarding how an employer that sponsors a retiree health plan should account for the recent changes in the Medicare law. Originally FASB indicated that employers should wait until FASB had time to issue guidance. However, their new position is that an employer may choose whether to account for the changes now or to wait until guidance is issued.

An employer may choose to account now for the end of 2003 for any savings the employer expects to realize due to the Medicare legislation. However, once FASB issues guidance, the employer may have to retroactively change the way it accounted for the liability. If an employer decides not to account for the changes now, then the employer must continue with that method until FASB issues guidance. The one exception is if something happens that would cause the employer to have to do a re-measurement, such as a plan amendment. In that case, the employer would then have to recognize the Medicare law without guidance from FASB. FASB is tentatively expecting to issue guidance by the end of March. For more information, contact Susan Relland, health policy legal counsel, at (202) 289-6700.

HHS Issues Medicare Message of the Day

The Department of Health and Human Services (HHS) has released several Medicare "Messages of the Day" that provide information on the changes made by the recently enacted Medicare legislation. The current postings cover the following topics:

The new messages from HHS are part of a broader campaign to educate Medicare beneficiaries about the operation of the new law. Employers, health plans, seniors groups and others are being encouraged by the Administration to begin communicating with retirees about the upcoming changes in Medicare, especially the new coverage for prescription drugs scheduled to start in 2006. Several new HHS fact sheets on different aspects of the legislation are also available now at www.medicare.gov, which will be frequently updated as similar summaries become available. For more information, contact Paul Dennett, vice president of health policy, at (202)289-6700.

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The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.