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.
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.