Cost Threshold And Cost Limit By Plan Year


Plan Year Ending Cost Threshold Cost Limit
2006 $250 $5000
2007 $265 $5350
2008 $275 $5600
2009 $295 $6000
2010 $310 $6300
2011 $310 $6300
2012 $320 $6500
2013 $325 $6600
2014 $310 $6350
2015 $320 $6600

Cost Threshold

The Cost Threshold is a federally defined amount of gross covered retiree plan-related prescription drug costs paid by a qualified retiree prescription drug plan and/or by Qualifying Covered Retirees. The amount up to the Cost Threshold is not eligible for subsidy. It is adjusted in the same manner as the annual Medicare Part D deductible and the annual Medicare Part D out of pocket threshold and is adjusted annually as defined in 42 C.F.R. §423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively.

Cost Limit

The Cost Limit is a federally defined amount of gross covered retiree plan-related prescription drug costs paid by a qualified retiree prescription drug plan and/or by Qualifying Covered Retirees. The amount exceeding the Cost Limit is not eligible for subsidy. It is adjusted in the same manner as the annual Medicare Part D deductible and the annual Medicare Part D out of pocket limit and is adjusted annually as defined in 42 C.F.R. §423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively.

Threshold Reduction

The amount below the federally defined Cost Threshold is not eligible for the subsidy. Therefore Plan Sponsors are not able to claim, for subsidy, this amount of gross covered retiree plan-related prescription drug costs. This ineligible amount is referred to as the Threshold Reduction.

The Plan Sponsor must calculate the Threshold Reduction at the retiree level within an Application. The Threshold Reduction amount must be reported to CMS' RDS Center for each Benefit Option, for each month, and will be the sum of all Threshold Reductions for all retirees for that Benefit Option, for that month. Plan Sponsors must keep retiree-level data for audit purposes.

Limit Reduction

The amount in excess of the federally defined Cost Limit is not eligible for the subsidy. Therefore Plan Sponsors are not able to claim, for subsidy, this amount of gross covered retiree plan-related prescription drug costs. This ineligible amount is referred to as the Limit Reduction.

The Plan Sponsor must calculate the Limit Reduction at the retiree level within an Application. The Limit Reduction amount must be reported to CMS' RDS Center for each Benefit Option, for each month, and will be the sum of all Limit Reductions for all retirees for that Benefit Option, for that month. Plan Sponsors must keep retiree-level data for audit purposes.

Page last updated: April 19, 2014

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