Eligibility for Retiree Medical Benefits

[Guest PBJ]

Employer who sponsors a fully insured health care plan is switching health care providers. Currently, the employer provides retiree medical benefits based on a very informal policy. I believe there are currently 4 people who are receiving such benefits. Most of whom were executives of the company. The new provider is requiring the employer define who is (or who will be) eligible to receive retiree medical benefits.

The twist is that employer wants to provide retiree medical benefits to "only those people selected by the Board of Directors." In other words, the employer does not want to say only select management or certain officers but wants to be able to provide retiree benefits to a person if they have been with the company for 20 years (as an example). However, employer does not want to provide retiree medical benefits for all of its employees, it does not want to lock itself into providing benefits to all, and it does not want to lock itself out of providing benefits to certain rank-and-file.

Employer wants to know if is it possible, under law, to provide retiree medical benefits as it wishes? If so, what is some language they could use to define the "group" who is eligible for retiree medical benefits.

Thank you!

[Don Levit]

PBJ:

Why not consider an employee-pay-all plan?

That way, it doesn't lock itself into providing benefits, and has no FASB liabilities.

Don Levit

[Larry M]

I assume you mean "carrier" or "insurance company" or"hmo" when you say the "provider".

As such, the carrier is asking for a simple definition of those who will become eligible to receive retirement benefits. This is the same as it requiring the sponsor to determine eligible active employees and dependents.

The employer wants to pick and choose those employees who, at the time they retire, may be eligible for this special privilege.

The carrier is concerned that the employer may pick only those retirees who are sick, and abuse the system.

So, you need a compromise.

Perhaps you should consider limiting those eligible for retiree benefits to the ones who were covered by the previous carrier.

At the same time, the sponsor should investigate the probable costs of providing retiree medical and determine whether it can truly afford this luxury.

After such a study, the employer may want to look at alternate means of recognizing these individuals' long service.