Phased Retirement - Ideas?

[waid10]

My employer would like to begin offering some sort of phased retirement package, and have asked me for ideas on how to do so.

They would like to allow executives that are in their early 60s, the option of cutting back hours to 20-30 hours per week. The difficulty is that these executives will have their categorization changed from full-time to part-time employees. This fact will eliminate the individual from eligibility for certain benefits (i.e., disability) and increase cost for other benefits (i.e., health insurance).

One option we are talking about is creating some sort of separate welfare wrap plan for these individuals. That way, they would not lose welfare benefits when they cut back. However, these are all high paid executives, so we could possibly run afoul of discrimination issues.

Another thought is to gross up the salaries of the individuals cutting back their hours. That way, they could go out and purchase certain welfare benefits on their own, but not suffer financially. The big issue here is that we are talking about employees in their early 60s. If they have to go purchase their own life insurance for a benefit of 2.5 times salary, it will cost a small fortune.

Does anyone have any other thoughts on an approach to this? What have other companies done?

Thanks.

[BeckyMiller]

Now - you need to recognize that I just mounted my hobby horse here. I feel really strongly about the need for this country to recognize the need to retain older workers and it is not just because I am past 50.

I think companies make a big mistake in looking solely at retaining older executive talent. This same kind of flexibility that you are offering to your executives may be a means of retaining skilled older administrative or line personnel. Something to consider is revising eligibility for healthcare to reduce the hours requirement for employees whose combination of age and service is at a specific level.

If you are self-insured there may be some testing rules to manage. If these benefits are insured, you need to check with your carrier.

[waid10]

Becky - I understand your concern. Unfortunately, I am not making policy at my employer. I am merely following instructions. So, does anyone have any ideas how to make something like this work?

[Locust]

You should talk to your insurance person. You don't have any IRS nondiscrimination requirements for insured health and disability plans. You could designate certain executives, or certain classes of executives, with reduced hours as being eligible for the benefits.

But there may be state insurance and underwriting issues, and I have no idea how those work out, so the insurance person is essential.

[david rigby]

... the insurance person is essential.

Not everyone will agree, but Ned will like this.

[Guest Ned Ryerson]

I am like air.

[No Name]

What kind of executive works less than 24 hours/day? Even when sleeping, I'm often doing paperwork, calculations, planning.

Executives paid by the hour? You're joking, right?

[mbozek]

I dont know how LI will cost a small fortune if the ees are buying term ins. Ins rates have declined for persons in good health. The ER could gross them up for such coverage or cover them under another arrangement. Health ins can be continued by paying the exec an additional amt to cover the increased ins cost, e.g., if ee was paying $500 mo pre tax for full time work and now will be working only 1/2 time then increase ee comp by $250 so that ee will still contribute 500 on pre tax basis. Or the employer could reimburse the ee on a non taxable basis for individual health ins that the ee purchases. The ee could purchase individual disabilty ins. and the er could gross the ee up for the cost.

[AndyH]

Never mind me, ..just chop licking...hot out here next to Ned's boat....

[Erik Read]

I've seen a few options. One we work with uses the 80 rule - age and years of service must equal 80 to qualify for early, and then they are limited to no more than 40 hours a month (one is limited to 50) before they are subject to suspension of benefits for the month.

We've also got retirees welfare - that covers from no earlier than 55 to MediCare age and is medical only, however, it's a self-insured plan - not sure how a fully insured plan would compare.