|
IMPORTANT
NOTICE---BEFORE YOU MAKE ANY DECISIONS ABOUT WHETHER TO STOP
PAYING HEALTH INSURANCE PREMIUMS, PLEASE READ THIS.
YOU MAY ADVERSELY AFFECT YOUR RIGHTS AND
INCREASE YOUR COSTS
The Section
1114
Retired Pilots' Committee has been notified that certain retired pilots
may
elect to simply stop paying health insurance premiums due to reduced
pension
payments. For your own sake, please "look before you leap."
Delta and
the Committee
have negotiated to take advantage of an important tax benefit with
respect to
health insurance premiums. The unfortunate fact that the
Delta
Pilots Pension Plan has been terminated and will be taken
over by the PBGC gives rise to an important benefit for those
under
65 which may substantially reduce your health insurance costs in the
long
run. That is the Health
Coverage
Tax Credit. The Health Coverage Tax
Credit ("HCTC") will pay 65% of a
retiree's premium cost for certain health coverages. To
be
entitled to the HCTC tax credit, however, you must be covered by
an
"HCTC qualified plan." An HCTC plan includes certain
state-qualified plans, your spouse's coverage through his or her
employer (if
the employer pays less than 50% of the cost of coverage) and most
importantly in Delta's case, a type of health coverage known
as "COBRA"
coverage.
COBRA is
a federal law that requires certain employers, such as Delta,
to make available the employer's health insurance program to
former
employees upon the occurrence of a "qualifying event." The
employer (Delta) must offer COBRA coverage to retirees, spouses and
dependents
(if the spouse and dependent have been covered by the Delta plan) for a
certain
period of time following the occurrence of a "substantial change in
coverage." Here, that change occurs on January 1,
2007, for retirees that are required to pay an increased
percentage
amount of the health insurance premium.
Delta's
COBRA coverage is
identical to the DPMP, and the individual premium is $460.14 per
month
(and remember, if you qualify, you will be entitled to an HCTC tax
credit of
65% of that premium).
You are
eligible for
COBRA if:
You
are a retiree, spouse or dependent currently covered by a Delta
plan OR
You
are a survivor currently covered by a Delta plan and your spouse
died less
than three years ago; AND
You
will experience a "substantial change in coverage" in your Delta
coverage such as increased premium cost arrangements that
take effect
January 1, 2007
If you are
eligible for
COBRA, you are eligible for HCTC if:
Your
spouse's employer does not pay more than 49% of you and your spouse's
health
coverage.
You
are not eligible for Medicare or similar subsidized coverage,
such as
TriCare.
You are actually receiving PBGC payments. (However, Delta is
negotiating
to remove this requirement in this case.)
If you are
HCTC eligible,
your premium payment after the tax credit will be 35% of the COBRA
rate, or
approximately $ 161.05 for 2007. As a result, eligible
retired
pilots end up paying a net lower premium than they do
now. If
the retired pilot is HCTC eligible, the spouse is HCTC eligible
provided
that she or he is COBRA eligible.
So, unless
you have a
better, cheaper option for health insurance coverage (i.e.,
spousal
coverage or TriCare), please carefully review whether you are
eligible for
HCTC before you simply elect to stop making your premium payments and
terminate
coverage. The
Committee believes
that those who terminate coverage may permanently surrender HCTC
eligibility
for two reasons:
- Insureds who
simply stop paying their premiums mid year likely forfeit their
right to opt back in to the Delta medical plan (unless they
show proof that they immediately picked up and maintained other
creditable coverage).
- Even if the insured did
what was needed to be able to opt back in for January 1, the
insured must be in the Delta coverage on December 31, 2006, or
they will not experience the necessary increased contribution
percentage in a way that would qualify them for COBRA.
Again, you must qualify for COBRA to become HCTC
eligible (or you must be enrolled in a qualified state
health plan or your spouse's employer-sponsored plan, if that
employer pays less than 50% of the cost of coverage).
Further
information on HCTC is available at the HCTC website at: http://www.irs.gov/individuals/article/0,,id=109960,00.html
Hopefully,
this short summary will help you to choose not to lose HCTC
eligibility if
it applies to you.
Thank
you.
Stinson
Morrison Hecker, LLP
Counsel
for the Section 1114 Retired Pilots Committee
|
