The Centers for Medicare & Medicaid Services (CMS) Retiree Drug Subsidy (RDS) Program is subject to the mandatory reductions in federal spending, or sequestration, in accordance with the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), as amended. Beginning with plan sponsors' incurred costs reported on or after April 1, 2013, and for the duration of the sequestration period, CMS applies a mandatory payment reduction to all plan months when calculating an RDS Application's Final Reconciliation subsidy payment. For additional information regarding the implementation of sequestration in RDS, see the guidance titled Mandatory Payment Reduction in CMS' Retiree Drug Subsidy Reconciliation Payments.
Section 3709 of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), enacted on March 27, 2020, temporarily suspended sequestration of Medicare programs during a period which we refer to as the "sequestration suspension period." As a result, the calculated Subsidy Amount for final costs incurred during the sequestration suspension period are exempt from sequestration when those months' costs are reconciled and final payment is requested.