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welfare plans, VEBAs


Gary

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In designing a welfare plan I am trying to assess the level of benefits.

For example regarding pre-retirement death benefits, they can be funded by life insurance and of course require annual premiums.

However, any suggestions regarding a value for the level of benefits for post-retirement medical or long term care insurance.

For example say normal retirement is age 55 and I want to establish a reserve by the employee's normal retirement age. How can I determine a reasonable level of reserve to target for post-retirement medical costs (inclusive of an insurance policy), or long term care costs (inclusive of an insurance policy).

For example if post retirement medical costs consist of health insurance and other out of pocket costs, then there must be a target dollar reserve that would cover these expenses over the course of the retiree's life time. For example perhaps $300,000 might cover the life time expense. So an annual deduction to accumulate to $300,000 would be necessary. Likewise for long term care.

Any help or reference to statistical data resources would be appreciated.

Thank you.

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IRC Section 419A requires that the reserves be limited to a safe-harbor amount (very small) unless they are determined by an actuary. The calculations are not done using "statistical data sources", they are done using standard actuarial methods and assumptions. And they are not done by laymen, but actuaries. You have no choice but to hire an actuary to do these calculations.

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I am a pension actuary and re: pensions, I know what benefits are allowed and what methods and assumptions are reasonable to value pension liabilities.

However, re: H&W plans I do not know what a reasonable level of post retirement medical benefits, long term care insurance, life insurance are. Additionally, I would need to know premium rates, out of pocket expenses, etc. at various ages.

So while calculating liabilites may not be the difficulty, it is determining the above information that I certainly would appreciate assistance as a starting point.

Thank you.

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I am also a pension actuary. I hired health actuaries on 2 separate occasions to assist me with similar projects, one for a health plan and the other for a combination life insurance/health reimbursement plan. I discussed all aspects of such plans with the actuaries, including the sources of their data (most was in-house proprietary stuff that M&R had developed). Their math was very familiar.

I also worked with in-house actuaries at an insurance company with respect to a similar project, but those calculations were based on specific promised benefits and calculations relative to the amounts that could be funded with respect to those present and future benefits.

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