RDS/Creditable coverage certifications — Attestations

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Are you eligible to receive the RDS?

In order to reduce interruption in prescription drug benefits for Medicare-eligible employees and retirees who already have coverage through their employer or plan sponsor, the Centers for Medicare and Medicaid Services (CMS) established several options for employers and plan sponsors to continue offering their current drug benefits at a lower cost.  The most popular of these options since inception is the retiree drug subsidy (RDS). 


Under the RDS, employers and plan sponsors who provide drug coverage for retirees may become eligible to receive a federal tax-free subsidy that will reimburse them for a share of the cost of providing drug coverage to their retirees.  The amount of the subsidy depends on actual drug expenditures under the plan, but is estimated to be worth, on average, more than $400 - $600 per participant per year.

Applying for the RDS

To be considered for the RDS, you must apply to CMS annually. The online application must be completed at least 90 days before the beginning of your plan year. CMS allows a one-time 30-day extension, however, as long as the application is started and the extension is requested before the original application deadline.

Actuarial equivalence and the RDS attestation

To qualify for the RDS, your retiree pharmacy plans must be at least "actuarially equivalent" to the basic standard Medicare Part D plan.  It  is a requirement that a "qualified" actuary or an actuary who is a member of the American Academy of Actuaries make this determination (actuarial equivalence testing/attestation) and document that the plan that is offered to retirees passes certain actuarial tests related to benefit plan design and retiree contribution levels. 

A qualified actuary uses two tests to determine actuarial equivalence: the gross test and the net test.  The gross test, which is the same as the "creditable coverage" test, determines whether, for the average beneficiary, the employer's or plan sponsor's retiree pharmacy benefit plan is at least as rich as the standard Medicare Part D plan. The net test subtracts the retiree contributions (premiums for pharmacy coverage) from the gross value and requires that the net value of the plan be at least as great as the basic standard Medicare Part D plan after taking into account the retiree contributions. If both tests are passed, then the plan has met "actuarial equivalence" and the qualified actuary can sign the required RDS attestation.

If the plan sponsor has multiple plans, if the benefits coordinate around Medicare Part D for retirees that enroll in Medicare Part D, if the retiree pays the full cost of benefits based on a blend of active employees and retirees, or if the retiree's contribution is a blend across coverage for medical and pharmacy, the actuarial equivalence testing is adjusted to incorporate the effect of these complications. 

We can test your plan for actuarial equivalence

Milliman's tools, models, and expertise enable us to perform the most complicated testing for actuarial equivalence and RDS attestations.  We have developed an efficient and cost-effective process for completing this work and have simplified the data-gathering process to make it easy to provide the required information. We provide clear documentation, including instructions for how to complete the sections of the RDS application that relate to actuarial attestations.

Contact us to begin the process.

Next steps