History and Description
The DDB program became effective for new retirees July 1, 2004. In response to numerous requests, this program is now offered to all retirees who are enrolled in University-sponsored medical coverage.
At the time it was introduced, faculty and staff had the option of retiring under the provisions of the “old” plan for a two-year period that ended June 30, 2006. The DDB program became effective for all faculty and staff retiring on or after July 1, 2006.
Health care costs and the escalation of those costs can be very unpredictable. Historically, health care costs have a much higher rate of inflation than the general consumer price index (CPI). Since the University offers retiree health care coverage, it has an obligation to record the liability of the program on its financial statements. Funding the program in a way that makes the University’s contribution towards retiree health care coverage more predictable is prudent fiscal management. It helps ensure that the benefit is likely to continue by establishing a manageable budget it seeks to fund. To that end, the University established a credit-based system that it provides to eligible retiring faculty and staff. The credits each eligible retiring faculty and staff member receives monthly may be used to purchase retiree health care coverage. The credits are also provided to the eligible spouse or domestic partner.
An initial amount of monthly credits was established in 2004. Each year, the credits are reevaluated and increased by the medical component of the CPI up to a maximum of five percent (5%). A section on this web site displays the credit history. To correspond with the federal government’s Medicare renewals, credits (value) are reviewed annually with an effective date of January 1.
Do I Pay for the Cost of Retiree Health Care Coverage?
- You will have an excess of credits that are rolled over from month to month and year to year if the cost of coverage is less than the amount of DDB credits you receive.
- You will be responsible for paying for the difference between the cost of coverage and the amount of credits you are provided if the cost of coverage exceeds the amount of DDB credits. Any amount above and beyond the credit (value) allowance will then be withdrawn each month from the checking account you designate on the Automatic Premium Payment Authorization (APPA) Form.
General Information about DDB Credits
- On the first of each month, a fixed amount of credits is applied to an account that may be used toward the reimbursement of retiree medical coverage.
- Separate accounts are provided to the retiree and the retiree’s spouse/domestic partner
- Credits may be used to reimburse retirees and their eligible spouses/partners for retiree medical coverage only.
- Credits cannot be used toward the cost of dental, vision, life insurance, or any other active employee medical coverage whether at the University, another employer, or a spouse/partner’s active employee coverage.
- Credits will accrue if coverage is obtained through a spouse/partner or another employer.
- Credits will not accrue while retirees and their spouses/partners are covered under the University’s pre-65 active medical plan.
- Under the DDB program, you may continue enrollment in University-Sponsored coverage or you may elect any other retiree medical coverage. The cost of the premiums may be reimbursed from the credits in an account established for you and your eligible spouse/partner.
DB Credits and Pre-65 Retiree Coverage
Eligible retirees between the ages of 62 and 65 have the following options:
- Continue active coverage until age 65 - You will be responsible for paying the cost share or difference that is not covered by the University. This cost share is the same amount paid monthly by active faculty and staff. Your cost share is paid for on an after-tax basis.
- Receive the DDB credits - You may have access to other active health care coverage. This coverage may be available through the active medical plan of your spouse/domestic partner or another employer.Your credits will accrue in your account for future use if you have other active coverage.
DDB Credits and Post-65 Retiree Coverage
Once you turn 65 as a retiree, active medical coverage through the University discontinues. However, you become eligible for several University-sponsored post-65 programs. The change occurs because of the integration with Medicare programs. Please refer to the section of this web site on Post-65 medical plans.
The DDB credits may be used to cover the cost of the post-65 coverage. Depending on the cost of the coverage, the DDB credits may cover the full cost of the coverage and even leave you with a surplus of credits or you may have to pay the difference between the cost of coverage and the amount of credits you receive.
Age Differences between the Retiree and the Spouse/Domestic Partner?
It is likely that the retiree may be 65 years of age or older while the spouse is younger than age 65 or vice versa. Listed below are the possible scenarios and the impact on coverage.
Spouses/Domestic Partners under Age 62
A University contribution is not provided to the spouse/domestic partner if they are at least age 62. They are eligible for access to group coverage but they are responsible for the full cost of that coverage.
Retiree is 65 or Older and the Spouse/Domestic Partner is between 62 and 65
- The retiree receives DDB credits that may be used to purchase post-65 coverage.
- The spouse/domestic partner is eligible to continue active coverage and pay the cost share or receive DDB credits.
Retiree is between 62 and 65 and the Spouse/Domestic Partner is age 65 or Older
- The retiree is eligible to continue active coverage and pay the cost share or receive DDB credits.
- The spouse/domestic partner receives DDB credits that may be used to purchase post-65 coverage.
What Happens to the Credits if I Die?
- The retiree’s credit balance is dissolved.
- The surviving spouse/domestic partner continues to receive credits for three months following the end of the month of the date of death of retiree. At that point, the spouse’s/domestic partner’s credits may be used until the balance is dissolved. The spouse’s/domestic partner’s credit balance is dissolved if he/she passes. Please refer to the section on Surviving Family for additional information on coverage.
Illustrative Examples of How DDB Credits May Be Applied
All examples below are based on illustrative, not actual, monthly premiums/credits to illustrate a monthly cost of coverage.
1. To purchase University-sponsored coverage:
The illustrative cost of coverage is LESS than the monthly DDB credit allowance:
You elect a Medicare Advantage HMO or PPO:
|Your monthly cost of coverage is:||$250.00|
|Your monthly DDB credits are:||$337.00|
|Total amount of surplus credits that accrue each month:||$ 87.00 (+)|
The illustrative cost of coverage is MORE than the monthly DDB credit allowance:
You elect a Medicare Complementary Plan:
|Your monthly cost of coverage is:||$400.00|
|Your monthly DDB credits are:||$337.00|
|Total amount deducted monthly from your checking account:||$ 63.00 (–)|
2. To purchase Non-University-sponsored coverage:
You move to Arizona and purchase a local Medicare HMO:
|Your illustrative monthly cost of coverage is:||$500.00|
|Your monthly DDB credits are:||$337.00|
|Difference in cost:||$163.00|
What happens in this situation?
- You pay the full cost of the premium directly to the Arizona HMO.
- Submit a receipt/proof of payment with a completed form to the Retiree Benefits Service Center for reimbursement.
- A total of $337 is debited from your DDB accrual balance.
- The Retiree Benefits Service Center will transfer the $337 to your checking account via direct deposit.
3. Accrue credits for future use:
Your eligible spouse or partner continues to work and enrolls you on his or her active coverage:
|Credits you accrue each month:||$337.00|
|Credits your spouse or partner accrues each month:||$337.00|
|Total accrual each month:||$674.00|