TN 25 (04-12)

HI 00805.278 SEP Enrollments for Aged Individuals with Hours’ Bank Arrangements

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 are accumulated in the employee’s Reserve of Contributions Account. The amount contributed to a Reserve of Contributions Account is determined by the number of hours the employee worked during a specific period of time. The contributions (or hours, which are later converted to a money amount) are ‘banked’ in the Reserve of Contributions Account and are used to pay for future group health plan (GHP) coverage provided by the Welfare Fund. This is known as an hours’ bank arrangement. Medicare is the secondary payer of benefits for GHP coverage provided by Welfare Funds based on an hours’ bank arrangement.

B. Policy for aged individuals with hours’ bank arrangements

Individuals, age 65 or older, who have group health plan 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 individuals (including retirees) continue to retain current employment status until the GHP coverage is no longer funded by an individual’s Reserve of Contributions Account, i.e., the hours’ bank is exhausted.

C. Policy for aged spouses of deceased workers

If a worker dies before the funds in the Reserve of Contributions Account are exhausted, the remaining funds are transferred to his or her spouse. When this situation occurs, consider the aged spouse of a deceased worker to have current employment status by virtue of this arrangement until the hours’ bank is exhausted.

D. Procedure for obtaining evidence of GHP coverage

You must modify Form CMS-L564 to request the last date that funds in the individual’s Reserve of Contributions Account paid GHP premiums. For SEP and premium-rollback purposes, consider the date indicated to be the last day of current employment status. 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 2008. He refused SMI because he had GHP coverage provided through his union’s Welfare Fund. The premiums for the GHP coverage were paid out of his Reserve of Contributions Account. In March 2011, the union advised Mr. Giles that his hours’ bank arrangement would end on May 31, 2011.

Under the SEP provisions, Mr. Giles can enroll in SMI any month that his GHP coverage is funded via his Reserve of Contributions Account or during the 8-month period beginning June 2011 (the first month he no longer has the hours’ bank arrangement). The premium surcharge calculation excludes any months during which the hours’ bank arrangement was in effect.