BENEFITS BYTE

May 25, 2004
BB 04—59

In this issue:

  • FASB Issues Final Guidance on Accounting and Disclosure Requirements Related to Medicare Prescription Drug Legislation
  • CMS to Host Special Listening Session on Employer Retiree Drug Benefit Subsidy: June 9 at 1:00 p.m. ET

FASB Issues Final Guidance on Accounting and Disclosure Requirements Related to Medicare Prescription Drug Legislation

On May 19, the Financial Accounting Standards Board (FASB) issued its final guidance (FAS 106-2) on accounting for the effects of the new Medicare prescription drug law. The rule requires companies to account for effects of the new Medicare prescription drug benefit as an "actuarial gain" to be amortized into income over the average working life of employees. The rule will take effect for fiscal periods beginning after June 15, 2004. The Medicare Modernization Act of 2003 allows a federal subsidy for employers who provide a prescription drug benefit to Medicare-eligible retirees that is "actuarially equivalent" to the Medicare prescription drug benefit. Companies that already attempted to calculate the accounting effects may have to recalculate their financial statements using this guidance. For more information, contact Paul Dennett, Council vice president, health policy, at (202) 289-6700.

CMS to Host Special Listening Session on Employer Retiree Drug Benefit Subsidy: June 9 at 1:00 p.m. ET

The Centers for Medicare and Medicaid Services (CMS) will hold a two-hour Special Listening Session on the Employer Retiree Drug Benefit Subsidy on June 9 at 1:00 p.m. (Eastern Time). CMS is hosting this session as part of its "Open Door Forum" programming designed to improve understanding of the implementation process and obtain input from various stakeholders.

As we have previously reported, The Medicare Modernization Act of 2003 (MMA) included a Medicare prescription drug benefit, providing subsidies for the purpose of supporting retiree health benefits provided by employers and unions. Beginning in 2006, employers and unions may receive subsidies for the purpose of maintaining prescription drug coverage for their retirees. To receive the subsidy, the employer or union must attest that the coverage is of equal or greater actuarial value as the new Medicare "Part D." Eligible individuals have the choice of whether to stay in employer-based coverage or to join Part D. Employers may offer coverage that exceeds Part D and have complete flexibility about how the benefit is designed.

The majority of the forum will be devoted to taking questions and suggestions from listeners. For information on how to RSVP with CMS for this Special Listening Session, click here or paste the following link into your browser window: http://www.cms.hhs.gov/opendoor/062004/employerodf.pdf.

In-person RSVPs are due by June 4.

For more information about this issue, please contact Maria Ghazal, Council director, 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.