Updated Guidance and Notices (Including a New Notice Obligation) for Medicare Part D

CMS has substantially revised the model notices. The new model notices are to be used beginning on and after May 15, 2006. As we indicated in our November 2005 newsletter, notices (tailored for the particular plan) should be provided to participants each year before November 15th (for instance, it could be provided with annual enrollment materials, if annual open enrollment is before November 15th), at the time of hire, and immediately upon the plan's prescription drug coverage changing from creditable to noncreditable (or vice versa). Because CMS has issued new guidance and revised model notices, plan sponsors will need to update their notices.

The guidance also adds a new notice obligation. A personalized disclosure notice must be provided upon request by an individual. (It can also be used in lieu of the model notice so long as it is provided at the times the model notice is required to be provided.) The guidance sets forth what is required to be contained in the personalized disclosure notice including, among other things, the participant's name, his/her social security number or health insurance claim number, the plan's name and contact information, whether the plan provided creditable or noncreditable coverage, and the date ranges of the time the person had creditable coverage. These personalized notices will be used by Medicare Part D plans to determine if the individual must pay a late enrollment fee.

The new guidance clarifies certain aspects of the rules, such as how the late enrollment penalty is calculated, what is considered an "integrated plan" in order to qualify for the simplified test for determining creditable coverage status and who is to receive the notices. The rules state that the disclosure notice is to be provided to all Medicare beneficiaries who are active employees, disabled, on COBRA, and those individuals who are retired, as well as Medicare beneficiaries who are covered as spouses or dependents under active employee coverage and retiree coverage. There is no exemption based on whether the prescription drug coverage is primary or secondary coverage to the Medicare Part D coverage.

The new model notices and guidance from CMS can be found at http://www.cms.hhs.gov/CreditableCoverage/02_CCafterMay15.asp.

Copyright © Trucker Huss. All rights reserved. This article is published as an information source for our clients and colleagues. The article is current as of the date shown above, is general in nature and is not the substitute for legal advice or opinion in a particular case. In response to new IRS rules of practice, we inform you that any federal tax information contained in this writing cannot be used for the purpose of avoiding tax-related penalties or promoting, marketing or recommending to another party any tax-related matters in this writing.