CMS Changes Reporting Requirements for Pension Costs Includable in the Medicare Wage Index. Transition Policy Allows Positive Adjustment for Defined Benefit Pension Plans That Were Prefunded during FYs 2007 – 2012.

REVENUE OPPORTUNITY

CMS recently announced that, beginning with the FFY 2013 Medicare Wage Index, allowable Defined Benefit Pension expenses will be based upon each hospital’s actual cash contributions to the plan over a 3-year period.  Thus, the FFY 2013 wage index will be based upon each hospital’s average funding contribution for FFYs 2008, 2009 and 2010.

In order to avoid disadvantaging hospitals with pre-funded pension plans, CMS included a “transition policy” under which hospitals will be allowed to establish a “prefunding balance” based upon the sum of cash contributions made during cost reporting years beginning October 1, 2003 through September 30, 2008, reduced by the actual total pension costs reflected in the wage index for those cost reporting periods.  A hospital’s prefunding balance may be different from its “carry forward amount,” which may include different cost reporting periods and contributions.

A hospital’s prefunding balance will be divided into ten equal installments, and 1/10th of the prefunding balance can be included in the wage index data filed for FFYs 2013 – 2022.   The hospital must have documentation to support the calculation of the prefunding balance when claiming the prefunding installment during each given cost reporting year.

To receive the full benefit of the transition policy, hospitals must (a) identify the proportionate amount includable as wage data for the FFY 2013 wage index and (b) send the fiscal intermediary a request for wage data correction by December 5, 2011.  Hospitals failing to timely submit their requests will lose the ability to amortize the prefunding amount for at least that year.

Hall Render is available to assist hospitals with determining their individual prefunding balances and preparing the necessary documentation for submission to the fiscal intermediary in order to take full advantage of CMS’ pension transition policy.

If you are interested in further exploring whether your Defined Benefit Pension Plan is subject to the new rule, or in engaging Hall Render for purposes of determining your hospital’s prefunding balance to ensure the hospital receives the full benefit of CMS’ transition policy, please contact us directly by November 4, 2011:  Angela M. Smith (317) 977-1448 or asmith@hallrender.com, Elizabeth A. Elias (317) 977-1468 or eelias@hallrender.com or your regular Hall Render attorney.