This section provides an overview of the RDS Program. Review this information if you are a Plan Sponsor that is considering applying for the program, or if you are new to your role in RDS.
Select a topic for more information on the RDS Program:
The Retiree Drug Subsidy (RDS) Program was enacted in December 2003 to reimburse Plan Sponsors for a portion of their Qualifying Covered Retirees' costs for prescription drugs otherwise covered by Medicare Part D that are attributable to such drug costs between the applicable Cost Threshold and Cost Limit. For more information about the Cost Thresholds and Cost Limits, refer to Cost Threshold and Cost Limit by Plan Year. Such incurred costs (including dispensing fees) that the Plan Sponsor pays, and that the retiree pays, are eligible for subsidy. Rebates received are subtracted from the amount eligible for subsidy.
To qualify for the subsidy, a Plan Sponsor must show that its coverage is "actuarially equivalent" to, or at least as generous as, the defined standard Medicare Part D coverage.
Plan Sponsors should maintain and furnish to CMS or the Office of Inspector General (OIG) upon request, the records enumerated in Federal regulations at 42 C.F.R. 423.888(d). The records are maintained for 6 years, or any other period as specified by CMS or OIG, after the expiration of the plan year in which the costs were incurred for the purposes of audits and other oversight activities conducted by CMS to assure the accuracy of the Actuarial Attestation and the accuracy of payments.
If a Plan Sponsor stops participating in the program, an active user account for the Account Manager and Authorized Representative roles is still necessary until four years have passed since the last Reconciliation Determination email was received. It is not necessary for the Plan Sponsor to notify the RDS Center when it stops participating.
The RDS statutory provisions are published at 42 U.S.C. 1395§-132 (Section 1860D-22 of the Social Security Act). The regulations are published at 42 C.F.R. Part 423, Subpart R.
The RDS Program has flexible rules that permit Plan Sponsors to continue providing drug coverage to their Medicare-eligible retirees at a lower cost.
RDS Program benefits include:
The Medicare Modernization Act (MMA) requires entities (whose policies include prescription drug coverage) to notify Medicare eligible policyholders whether their prescription drug coverage is creditable coverage, which means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage.
There is only one disclosure requirement for RDS Plan Sponsors: to provide a written disclosure notice to all Medicare-eligible individuals who are covered under its prescription drug plan. The written disclosure is provided annually prior to October 15th each year and at various times as stated in the regulations, including to a Medicare eligible individual when he/she joins the plan.
The requirement that entities complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan does not pertain to the Medicare beneficiaries for whom entities are receiving the Retiree Drug Subsidy (RDS).
Refer to the Creditable Coverage page of the CMS website for more information.
To participate in the RDS Program, an organization must:
Participating in the RDS Program begins with creating a Plan Sponsor Account, and submitting a timely RDS application prior to the expiration of the Application Deadline. For more information about the Application Deadline, including what is required to be submitted by the Application Deadline, refer to Important Application Deadline Information.
Ongoing maintenance of an approved RDS application is recommended throughout the application plan year. These tasks include managing RDS Secure Website user roles, managing retiree information, completing Payment Setup, performing Cost Reporting, submitting interim payments if the Plan Sponsor has elected an Interim Payment Frequency, and completing Reconciliation.
A Plan Sponsor starts in the RDS Program by designating an Account Manager who will create a new Plan Sponsor Account, register the organization, and assign other key players required to complete RDS tasks.
After creating a Plan Sponsor Account, the Account Manager or Authorized Representative must create an RDS application on the RDS Secure Website for each plan year for which the Plan Sponsor would like to request subsidy.
For more information about the Application Deadline, including what is required to be submitted by the Application Deadline, refer to Important Application Deadline Information.
Tasks are completed by the key players who act on the Plan Sponsor's behalf. RDS user roles are granted specific tasks and privileges in the RDS system. The RDS Secure Website user roles include: Authorized Representative, Account Manager, Actuary, and Designee.
RDS Secure Website users must maintain an active Login ID, Password, and Multi-Factor Authentication (MFA) configuration at all times.
To enforce a separation of duties, a user may not report cost data and request payments on the same application.
Note: The RDS Secure Website allows an individual to act in only one role at a time.
It is necessary to manage retiree information during the entire lifecycle of an RDS application. Plan Sponsors specify the method used to submit retiree data, the source of the retiree data, and the methods that CMS' RDS Center should deliver the Retiree Response Files and Weekly Notification Files.
The Application Submission Process requires the Plan Sponsor to send a retiree file to CMS' RDS Center with demographic and benefit enrollment information about the beneficiaries for whom subsidy is requested. This file is called a Valid Initial Retiree List.
After an application is approved, the Plan Sponsor should continue to send retiree files to CMS' RDS Center throughout the Application Lifecycle to notify CMS' RDS Center of any additions, deletions, or changes in Qualifying Covered Retiree (QCR) information. CMS' RDS Center will respond to the Valid Initial Retiree List and subsequent retiree files with a Retiree Response File using the method specified.
In addition, Weekly Notification Files are sent as necessary to inform the Plan Sponsor of changes that may impact the approved subsidy for QCRs. CMS' RDS Center evaluates program eligibility and provides the Plan Sponsor with Subsidy Periods and benefits for each beneficiary.
The Plan Sponsor and its agents must continually process Retiree Response and Weekly Notification Files produced by CMS' RDS Center throughout the plan year to keep internal retiree records updated to report accurate cost data to CMS' RDS Center.
Retiree EDI Methods and Sources are selected by the Plan Sponsor to indicate the methods by which Electronic Data files are sent and received. The selections may be changed at any time throughout the plan year after the appropriate connection has been established and tested.
Four methods of submission are available for exchanging retiree information with CMS' RDS Center:
Plan Sponsors and Vendors can upload retiree data formatted in a Comma Separated Value (CSV) file to the RDS Secure Website to submit retiree data.
Data exchanged using a Vendor Mainframe or a Plan Sponsor Mainframe connection (e.g., Connect:Direct) requires setup and testing before a retiree file can be accepted by CMS' RDS Center. Each retiree file must be formatted with a Header Record, Detail Record, and Trailer Record. A retiree file can include data for multiple applications in the same transmission.
A Voluntary Data Sharing Agreement (VDSA) or Mandatory Insurer Reporting (MIR) facilitated by CMS' Coordination of Benefits (COB) Contractor requires setup and testing before a retiree file can be accepted by CMS' RDS Center.
A Coordination of Benefits (COB) Contractor authorizes the Centers for Medicare & Medicaid Services (CMS) and an employer, or agent on behalf of an employer, to electronically exchange health insurance benefit entitlement information.
During Payment Setup, the Plan Sponsor needs to determine who will report cost data for each Benefit Option, how the information will be transmitted, and who will request interim payments if the Plan Sponsor has elected an Interim Payment Frequency.
The Plan Sponsor may submit data on its own behalf or elect a Vendor to complete this Cost Reporter task.
Payment information may be transmitted using the RDS Secure Website or Mainframe connection.
All Benefit Options must be assigned to a Cost Reporter to complete Payment Setup.
Payment Setup must be complete prior to Cost Reporting or submitting Payment Requests.
Cost Reporting is the process of reporting cost data for Qualifying Covered Retirees (QCRs) on an approved RDS application. Interim cost data may be reported throughout the plan year if the Plan Sponsor has elected an Interim Payment Frequency. Final cost data must be reported for an Annual Payment Frequency and final Reconciliation.
Federal law requires that cost data is submitted only for the QCRs, corresponding Subsidy Periods, and the Benefit Options in which each QCR is enrolled.
Cost Reporting assignments must be completed in Payment Setup prior to submission of cost data.
Reconciliation is the process by which a Plan Sponsor who has received any interim payments must submit to CMS, after the end of the plan year, the total gross covered retiree plan-related prescription drug cost and actual cost adjustments for the application. The sum of the interim payments is compared with the final subsidy payment determination for the application. If the sum of the interim payment requests is larger than the final calculated subsidy amount for the application, CMS will initiate immediate overpayment recovery action including offset against other applications with positive payment requests.
A Plan Sponsor that chose an Annual Payment Frequency, or otherwise did not receive any interim payments, and that wishes to receive a subsidy, must use the Reconciliation process to submit final cost reports and submit its one and only subsidy payment request.
The RDS Program is virtually paperless. All communication is through the RDS Program Website, RDS Secure Website, and email.
The RDS Program Website is a comprehensive resource center for the RDS Program. Educational tools and announcements are available, as well as specific instructions to complete processes in the RDS Program.
The RDS Secure Website allows participants to register and complete the tasks required to participate in the RDS Program and request subsidy.
For security purposes, RDS Secure Website users are required to complete a registration process and maintain an active Login ID and Password.
RDS Secure Website users may only act in one user role in the RDS Secure Website, so an individual must be assigned the same user role for each Plan Sponsor they are associated with. CMS' RDS Center validates an individual's Date of Birth and Social Security Number to ensure that each individual has only one user account at a time.
CMS' RDS Center sends emails to RDS Program participants regarding account and application activity, notifications, deadline reminders, and updated information for both the RDS Program Website and the RDS Secure Website. It is important to keep your personal information accurate and up to date in the RDS Secure Website so that you may receive this information.
For a list of email addresses from which RDS correspondence may be sent, refer to the Contact Us page.
The RDS Secure Website user roles required to participate in the RDS Program are: Account Manager, Authorized Representative, and Actuary. In addition to these roles, the Plan Sponsor may choose to assign a Designee to complete certain tasks.
Note: The RDS Secure Website allows an individual to act in only one role at a time.
To enforce a separation of duties, a user may not report cost data and request payments on the same application.
The Account Manager initiates and manages the Plan Sponsor's applications throughout their lifecycle, by beginning the application and completing its tasks. The Account Manager manages the reporting of retiree data, cost data, payment requests, Reconciliation, and assigns, manages, and reassigns other users within the Plan Sponsor's account to complete those tasks.
The Account Manager may be an employee of the Plan Sponsor organization for which they initiate an RDS Program Application. If not directly employed by the Plan Sponsor, the Account Manager may act as an agent on behalf of the Plan Sponsor.
The Authorized Representative is a user chosen by the Plan Sponsor that is deemed to have sufficient authority to be legally responsible for the terms of the Plan Sponsor Agreement and the Reconciliation Agreement. The Authorized Representative has been granted the legal authority to bind the Plan Sponsor to the terms of the Plan Sponsor Agreement. The Authorized Representative takes responsibility for these agreements by signing them electronically during the application and Reconciliation processes.
The Authorized Representative may also begin an application, complete many steps of the application (except attest the application), and assign or manage RDS Secure Website user roles as necessary. The Authorized Representative typically delegates these duties to the Account Manager or Designee and is not actively involved in the RDS Program other than verifying the work of other users.
The Authorized Representative must submit the RDS application.
The Authorized Representative must submit the final Reconciliation payment request and may submit interim payment requests.
The Authorized Representative is a designated Payment Requester and may not report any costs.
The Authorized Representative must be an employee of the Plan Sponsor. For multi-employer plans, the Authorized Representative does not have to be an employee of the Plan Sponsor, but may be a member of the jointly appointed board of trustees, which includes both labor and management trustees.
Common examples of positions within the Plan Sponsor organization that are held by the Authorized Representative are:
The Actuary is a professional contracted by the Plan Sponsor applying to the RDS Program to attest to the Actuarial Equivalence of the Benefit Options specified in an RDS application. The Plan Sponsor must show that its coverage is as generous as, or more generous than, the defined standard coverage under the Medicare Part D Prescription Drug Benefit.
Attesting to the Actuarial Equivalence of the Benefit Options specified in the RDS application is the only responsibility of the Actuary. Actuaries have no role in application maintenance after the application is approved, nor in Reconciliation.
To qualify for CMS' RDS Program, the Actuary must have a current membership and be in good standing with the American Academy of Actuaries. Attesting to the Actuarial Equivalence of the Benefit Options specified in the RDS application is the only responsibility of the Actuary.
In order for actuaries to be invited to attest an RDS application, they must first opt-in to participate in the RDS program on the American Academy of Actuaries website. Refer to American Academy of Actuaries: The Retiree Drug Subsidy Program for information on this process.
A Designee is an optional user role. A Designee or multiple Designees are created by the Account Manager or Authorized Representative to assist with RDS Secure Website tasks.
A Designee is assigned privileges by the Account Manager or Authorized Representative. A Designee can complete many different tasks. The following table identifies the name of the Designee privilege and the description of the task.
|Assign Actuary||Enter Actuary Information in Step 3: Assign Actuary in the Application Submission Process|
|Complete Electronic Funds Transfer (EFT) Information||Enter Banking Information and Bank Contact information to set up Electronic Funds Transfer in Step 5: Electronic Funds Transfer (EFT) Information in the Application Submission Process|
|Retiree Electronic Data Interchange (EDI) Methods and Sources||Choose method and source of submission in Step 7: Retiree Electronic Data Interchange (EDI) Methods and Sources in the Application Submission Process. Available methods are: RDS Secure Website to RDS Center, Vendor Mainframe to RDS Center Mainframe, Coordination of Benefits (COB): Voluntary Data Sharing Agreement (VDSA) or Mandatory Insurer Reporting (MIR), or Plan Sponsor Mainframe to RDS Center Mainframe. Choose to receive copies of Retiree Response Files on the RDS Secure Website and choose Weekly Notification Method.|
|Define Benefit Options||Define Benefit Option Name, Unique Benefit Option Identifier, Benefit Option Type, and in Step 2: Benefit Option in the Application Submission Process|
|Define Payment Frequency||Choose between Monthly, Quarterly, Interim Annual, or Annual Payment Frequencies in Step 6: Payment Frequency in the Application Submission Process|
|Delete Application||Request to CMS' RDS Center to delete an application|
|Request Extension||Submit a request to extend the Application Deadline|
|Report Costs||Submit Interim Cost Report or Final Cost Report|
|Request Payment||Request Interim Payment and/or assist in preparing the Final Reconciliation Request|
|Submit Appeal||Request an appeal to have a Determination reconsidered
View requested appeals
|View Attestation Summary||After Actuarial Attestation, view the Attestation Status of the Benefit Options for an RDS Program application|
|View/Send/Receive Retiree Data||Manage retiree information using the RDS Secure Website. If authorized to view Protected Health Information (PHI), privileges include:
|Withdraw Application||Request to CMS' RDS Center to withdraw an application|
A Designee may be, but is not required to be, an employee of the Plan Sponsor. A Designee may be an employee of a Vendor contracted by the Plan Sponsor to report retiree data or cost data.
The RDS Secure Website allows an individual to act in only one role at a time. An Authorized Representative and an Account Manager may be assigned to multiple Plan Sponsors acting in the same user role. A Designee and an Actuary may be assigned to multiple applications acting in the same user role.
To reassign a user associated with multiple Plan Sponsors, contact CMS' RDS Center.
A Vendor is a Pharmacy Benefit Manager (PBM), Health Plan, or other third-party company that a Plan Sponsor may contract to report cost data or manage retirees for the Plan Sponsor's applications.
Vendors must contact CMS' RDS Center to register and obtain a Vendor ID.
If a Vendor will submit cost reports or retiree files using the RDS Secure Website, the Plan Sponsor must create a Designee role for the Vendor to access the RDS Secure Website. If the Vendor is submitting cost files or retiree files by Mainframe, a Designee user role may still be necessary to allow the Vendor to manage retiree information and cost submissions using the RDS Secure Website.
A COB contractor may be responsible for managing retirees for the Plan Sponsor's application through VDSA or MIR.
The Bank Contact may be employed by the Plan Sponsor or employed by the Plan Sponsor's bank.
The Bank Contact's primary responsibility is to answer any questions asked by CMS' RDS Center regarding Electronic Funds Transfer of payments.
The Bank Contact is not granted an RDS Secure Website Login ID.
The Bank Contact is assigned during the RDS Program application process by the Account Manager, Authorized Representative, or Designee with Complete Electronic Funds Transfer (EFT) Information privileges.
The Bank Contact's information may be updated throughout the plan year. This information must be completed for each new application and plan year.
A Coordination of Benefits (COB) Contractor may set up retiree file data transfer for a Plan Sponsor using Voluntary Data Sharing Agreement (VDSA) or Mandatory Insurer Reporting (MIR).
The COB Contractor is not granted an RDS Secure Website Login ID.