TN 78 (03-23)

HI 00805.278 SEP Enrollments for Aged Beneficiaries with Hours’ Bank Arrangements - Group Health Plans

A. Background hours’ bank arrangements

In cases where both an employer and an employee organization (e.g., a union) contribute to a “Welfare Fund” for an employee (generally in the construction industry), the funds not used to meet immediate eligibility requirements accumulate in the employee’s Reserve of Contributions Account. The number of hours the employee worked during a specific period determines the amount contributed to a Reserve of Contributions Account. The employee’s Reserve of Contributions Account “banks” the contributions (or hours, which are later converted to a money amount) to pay premiums for future group health plan (GHP) coverage that the Welfare Fund provides. We call this an hours’ bank arrangement. Medicare is the secondary payer of benefits for GHP coverage that the Welfare Fund provides based on an hours’ bank arrangement.

B. Policy for aged beneficiaries with hours’ bank arrangements

Beneficiaries, age 65 or older, who have GHP coverage that extends beyond or between periods of active employment, such as union members, often have hours’ bank arrangements. For purposes of the special enrollment period (SEP) and premium-surcharge rollback, these beneficiaries (including retirees) continue to retain current employment status until the beneficiary’s Reserve of Contributions Account no longer funds the GHP coverage, i.e., the beneficiary used all funds in the hours’ bank.

C. Policy for aged spouses of deceased workers

The aged spouse of the worker may receive the remaining funds in the Reserve Contributions Account if a worker dies before they used all the funds. The aged surviving spouse will have current employment status by virtue of this arrangement until they use all funds in the hours’ bank.

D. Procedure for obtaining evidence of GHP coverage

Obtain evidence as outlined in HI 00805.295. Section B of Form CMS-L564 (Request for Employment Information) includes specific questions for employers to indicate information regarding the hours’ bank arrangement and the last date that funds are available in the individual’s Reserve of Contributions Account paid GHP premiums. For SEP and premium surcharge rollback purposes, the last day of current employment status is the date that the reserve hours ended or will end. For more information about Form CMS-L564, see HI 00805.295A.

E. Example applying the hours’ bank rules

Mr. Giles attained age 65 in January 2010. Mr. Giles refused SMI because of GHP coverage provided through the union’s Welfare Fund. The premiums for the GHP coverage were paid out of the Reserve of Contributions Account. In March 2014, the union advised Mr. Giles that the hours’ at the bank would end on May 31, 2014.

Under the SEP provisions, Mr. Giles can enroll in SMI any month that the GHP coverage is funded via the Reserve of Contributions Account or during the 8-month period beginning June 2014 (the first month Mr. Giles no longer has the hours’ bank arrangement). The premium surcharge calculation excludes any months Mr. Giles was currently employed with GHP coverage and continued coverage under the hours’ bank arrangement.

F. Reference

HI 00805.295 Evidence of GHP or LGHP Coverage Based on Current Employment Status

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HI 00805.278 - SEP Enrollments for Aged Beneficiaries with Hours’ Bank Arrangements - Group Health Plans - 03/08/2023
Batch run: 03/08/2023