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After HHS, DOL, and IRS confirmed in October 2010 that retiree-only health plans were not subject to the Affordable Care Act requirements, many employers split their combined active/retiree health plans into separate plans to eliminate the need to change their retiree coverage to comply with the new requirements.  For those employers who haven't split their combined plans yet, the latest set of FAQs from the agencies provides a very good reason to take that step.  More and more employers are changing their retiree health care coverage from a traditional "defined benefit" program, where the plan provides a schedule of benefits, to a "defined contribution" program, where the employer allocates a specified dollar amount to a health reimbursement arrangement ("HRA") for each retiree (and for the retiree's spouse and dependents, in some plans) and does not provide any other retiree health care benefits.  The retiree can use the amount in his or her HRA to pay for premiums for an individual insurance policy, including Medicare supplemental insurance and Medicare Part D insurance, as well as out-of-pocket medical expenses.  The HRA structure gives the employer more control over - and certainty of - future retiree health care costs.  However, stand-alone HRAs (where the HRA is not integrated with employer-provided group health benefits) will not be treated as complying with the Affordable Care Act's prohibition on annual or lifetime limits on benefits.  So the only way an employer can use a stand-alone HRA program for its retiree health care benefits is through a retiree-only health care plan.  Separating retiree health coverage from active employee health coverage requires adopting a separate retiree health plan document and separately complying with all of the ERISA reporting and disclosure requirements for the retiree health plan (such as summary plan descriptions, Forms 5500, and summary annual reports).  But employers who still have combined active/retiree health plans should evaluate if the potential cost-savings from a separate retiree health plan's exclusion from the Affordable Care Act requirements (as well as the HIPAA nondiscrimination and special enrollment rules, which also do not apply to retiree-only plans) outweigh the additional administrative costs for the separate retiree health plan.

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