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News Items, by Subject

Health plans - retiree coverage


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Sixth Circuit: No Lifetime Health Care Benefits for Honeywell Retirees
"Reversing a district court's conclusion that Honeywell retirees were entitled to lifetime health care benefits, the Sixth Circuit ... noted that ... because the language of the collective bargaining agreements was clear, there was no need to look to extrinsic evidence ... [T]he CBAs specifically provided for lifetime health care benefits to surviving spouses and dependents, but did not provide such lifetime benefits to retirees themselves." [Fletcher v. Honeywell International, Inc., No. 17-3277, (6th Cir. June 8, 2018)] (Wolters Kluwer Law & Business)
Successor Not Liable for Misrepresentations by Past Fiduciaries Regarding Retiree Health Care
"Retired security guards had brought suit seeking to restore health care benefits to prior levels, alleging that they were promised stable premiums and retirement benefit levels similar to what they received as active employees. However, because the contractor did not assume control of the health care plans until after these representations had been made, the court granted its motion for summary judgment on the misrepresentation claim." [Hatmaker v. Consolidated Nuclear Security, LLC, No. 15-351 (E.D. Tenn. May 30, 2018)] (Wolters Kluwer Law & Business)
Retiree Healthcare Back in Focus
"[E]mployer plan eligibility rules must be amended to include any class of employees not actively at work or the plan may find itself with uncovered stop loss claims. If the employer prepares its reporting under Generally Accepted Accounting Principles, rules require that the cost of retiree benefits be accrued in the year the liability arises (i.e. during the working years) and actuarial studies are required." (Frenkel Benefits)
Medicare Financial Outlook Worsens
"[T]he trustees projected lower wages for several years, which will mean lower payroll taxes, which help fund the program. The recent tax cut passed by Congress would also result in fewer Social Security taxes paid into the hospital trust fund, as some higher-income seniors pay taxes on their Social Security benefits. The aging population is also putting pressure on the program's finances." (Kaiser Health News)
Hacking Longevity: Understanding the Implications of Living to 100
"[This] research ... explores the key inflection points that people face as they enter each new stage of their lives between ages 35 to 80+, and how living longer informs their planning, expectations, and perceptions across domains such as health, finance, social connection, and learning." (AARP)
[Guidance Overview] Pension and OPEB Underfunded Status of Michigan Local Government Plans under the 'Protecting Local Government Retirement and Benefits Act' (PDF)
"[U]ntil the state treasurer publishes the first set of annual assumptions, considerable uncertainty remains as to what the impact will be on each plan's liability. In fact, it is possible that a particular plan might be considered fully funded under the current actuarial assumptions that are being used for determining contributions to the plan or for satisfying financial reporting requirements, yet be considered underfunded based on new mandated assumptions. This paper aims to help stakeholders of Michigan's many local government pension and other post-employment benefit (OPEB) programs develop informed expectations, based on the range of outcomes that could result from the state treasurer's decisions." (Milliman)
[Opinion] Why Employers Need to Offer Retiree Healthcare Benefits
"Employees may postpone their retirement date to save more and maintain coverage through their employer's health plan. This may affect the employer's ability to renew the workforce or bring in new talent. This could also impact total compensation strategies and active health insurance risk pools, as older workers typically earn more and drive higher overall health insurance costs than younger employees." (Voya)
Facts About Medicare That All Employers Should Know
"[1] For most health plans, Medicare will take on the role of the 'Secondary Payer,' while your health plan will be the 'Primary Payer.' ... [2] For employers with less than 20 employees, Medicare will generally act as the Primary Payer for Medicare-entitled employees.... [3] [If] an employee's spouse receives coverage through your plan as a dependent, and the spouse retires but the employee continues to work, your plan will typically act as the Primary Payer for the retired spouse, and Medicare will be the Secondary Payer." (HR Daily Advisor)
[Guidance Overview] GASB 74/75: OPEB Expense and Balance Sheet Items (PDF)
"The OPEB expense on the income statement now arises from changes in the Net OPEB Liability (NOL) over the measurement period, which is calculated as the Total OPEB Liability (TOL) minus the Fiduciary Net Position (FNP).... Plans that provide OPEB benefits to fewer than 100 members may use the alternative measurement method, which simplifies some assumptions and calculations.... The Required Supplementary Information (RSI) is now to include several 10-year schedules." (Milliman)
Cumulative Out-of-Pocket Health Care Expenses After Age 70
"For those who die at age 95 or later, the median cumulative out-of-pocket expense after age 70 until death is slightly above $27,000.... Nursing home expenses are one of the biggest contributors driving the skewness of the distribution.... For all surveyed people, the median out-of-pocket nursing home expense is zero.... Longevity has a strong positive correlation with nursing home entry, total out-of-pocket health care expenses, and out-of-pocket nursing home expenses. One-in-three of the surveyed retirees are covered by Medicaid after age 70." (Employee Benefit Research Institute [EBRI])
The HSA in Your Future: Defined Contribution Retiree Medical
"This variant will ... likely be limited to Medicare-eligible retirees, using a Medicare Advantage or Medigap exchange, where coverage is retiree pay all -- financed by accumulated Health Savings Account assets.... [T]his alternative is all about reducing expense while improving both the real and perceived value of the Total Rewards Package." (Plan Sponsor Council of America [PSCA])
$280k Is What a Couple Retiring This Year Will Need to Cover Health Care
"A 65-year-old couple retiring this year will need $280,000 to cover health care and medical expenses throughout their retirement, according to Fidelity Investments. This is a 2% increase from 2017 -- and a 75% increase from Fidelity's first estimate in 2002. Fidelity says the cost breaks out to $133,000 for men and $147,000 for women, primarily because of their expected longer lifespans." (PLANSPONSOR)
How Fear of Catastrophic Health Care Expenses May Cause Retirees to Inefficiently Self-Insure (PDF)
"[M]edian cumulative out-of-pocket medical expenses for the long-lived elderly is quite modest at $27,000. At the same time, it is true that some long-lived elderly report very high cumulative out-of-pocket medical expenses: 10 percent of this older cohort say they racked up more than $172,000 in out-of-pocket medical expenses, and 5 percent report spending more than $269,000 in out-of-pocket medical expenses.... While most (61 percent) long-lived elderly do enter a nursing home, less than one-third (32.2 percent) incur out-of-pocket nursing home expenses." (Employee Benefit Research Institute [EBRI])
Whirlpool Retirees Get Union Support in Health Care Dispute
"The unions are urging the U.S. Court of Appeals for the Sixth Circuit to affirm a district court ruling that blocked Whirlpool from raising health insurance costs to retirees, according to a friend-of-the-court brief filed April 12 by unions that represent approximately 1.3 million auto workers and steelworkers. The unions' support for the retirees comes three months after the Michigan attorney general filed a brief in the same case criticizing the 'uncertainty and inconsistency' of the Sixth Circuit's recent case law." [Zino v. Whirlpool Corp., 6th Cir., Nos. 17-3851, 17-3860, amicus brief filed Apr. 12, 2018] (Bloomberg BNA)
Kraft Heinz Beats Another Lawsuit Over Retiree Health Benefits
"Each relevant bargaining agreement contained an unambiguous 'reservation-of-rights' clause allowing Kraft to modify or terminate its benefit plans at any time ... The retirees therefore had no vested right to lifetime health coverage, and Kraft was within its rights to move them to a less generous benefit plan, the judge said." [Beale v. Kraft Heinz Foods Co., No. 16-119 (S.D. Iowa Mar. 27, 2018)] (Bloomberg BNA)
Exploring Retiree Health Care Options
"Over the last decade, plan sponsors of traditional retiree group health coverage have increasingly turned to private Medicare Marketplaces and Employer Group Waiver Plans (EGWP) to find better value for their Medicare-eligible retirees. While the retiree experience in EGWPs more closely resembles that of traditional retiree coverage, private Medicare Marketplaces can offer greater value for both plan sponsors and retirees. Plan sponsors who offer traditional retiree group coverage should consider these alternatives as they seek efficient ways to honor their benefit obligations to Medicare-eligible retirees." (Willis Towers Watson)
Trend Favors Employers in Retiree Medical Litigation
"CNH and Cooper should put to rest any dispute that M&G Polymers dramatically changed the framework for assessing retiree medical claims in the CBA context. Absent explicit language to the contrary, general durational clauses govern the duration of retiree medical benefits, and the obligation to provide such benefits expires with the applicable CBA." (Morgan Lewis)
[Opinion] Congressional Letter to CMS Requesting Changes to 2019 Advanced Notice and Call Letter (PDF)
"For CY 2019, CMS is proposing to fully phase-in a new payment methodology ... [which] is not set based on actual bids submitted by the Employer Group Waiver Plans (EGWPs), but is instead based off bids submitted by non-EGWP plans. This new payment methodology may reduce employers' ability to provide retiree benefits through a consolidated health plan encompassing both Medicare benefits and supplemental retiree offerings, thus reducing beneficiary choice.... [We] request that CMS reconsider the changes finalized by the previous Administration as part of the CY 2017 Final Notice and instead find a payment methodology that will best account for the difference in the proportion of beneficiaries who are enrolled in a Health Maintenance Organization (HMO) versus a Preferred Provider Organization (PPO)." (Energy and Commerce Committee, U.S. House of Representatives)
Supreme Court Again Rejects Sixth Circuit Finding of Lifetime Retiree Medical Benefits
"The Supreme Court granted certiorari and reversed the Sixth Circuit in a single order and unanimous per curiam opinion, without the normal requirement of briefs by the parties on the question presented. In doing so, the Supreme Court sent a clear message that the Sixth Circuit's interpretation of Tackett was wrong, and that Judge Sutton's dissent correctly states the law." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (McGuireWoods)
Evaluating Options to Finance Retiree Medical Commitments
"With health care reform and tax reform as key legislative initiatives, employers have increased interest in alternative financing and annuity buyout strategies.... An annuity purchase eliminates the organization's long-term obligations with retiree medical benefits ... Annuity buyouts and other exit strategies would not be possible if retirees did not have ready access to individual health insurance coverage.... Employers can take a multiyear approach to solving this problem, which can help to make transitions easier on beneficiaries." (Willis Towers Watson)
Supreme Court Orders Sixth Circuit to Clean Up Its Retiree Health Benefits Case Law 'Mess'
"The Court stressed that a contract is not ambiguous unless it is subject to more than one reasonable interpretation, and the inferences made by the Sixth Circuit under its own precedent cannot generate a reasonable interpretation because they are not 'ordinary principles of contract law'. Six days after Reese, ... the Court granted certiorari to another Sixth Circuit case ... immediately vacated the lower court's judgment, and remanded the case for further consideration in light of Reese." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Jackson Lewis P.C.)
Supreme Court Reaffirms Ordinary Principles of Contract Law Apply When Interpreting Collective Bargaining Agreements
"The agreement at issue contained a general durational clause that applied to all benefits unless otherwise specified. As such, the Court held that the general durational clause meant the agreement unambiguously provided that CNH retirees were entitled to company-provided health benefits only until the agreement expired and not indefinitely." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Seyfarth Shaw LLP)
Supreme Court Once Again Finds Retiree Health Benefits Are Not Vested
"The Court reiterated that CBAs must be interpreted through 'ordinary principles of contract law' and firmly rejected the Sixth Circuit's holding that courts can consult extrinsic evidence to determine whether retiree health benefits are vested for life. The Court rejected the pro-vesting inference -- namely that the CBA's alleged 'silence' on the duration of health care benefits showed that the labor contract was ambiguous, and therefore needed to be interpreted by reference to facts existing outside the written contract." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Ogletree Deakins)
Localities Want to Make Retiree Bills More Affordable, So Why Won't States Let Them?
"Michigan's local governments had put together a meaningful proposal last year to reform other post-employment benefits (OPEB) ... [L]ocalities were asking lawmakers to let them make the hard decisions to pare back health-care costs and bring them in line with the private-sector market.... In December, the legislature declined localities' request for more leeway." (Governing)
How Public Sector Employers Can Manage Retiree Health Liabilities (PDF)
"Changes in the Governmental Accounting Standards Board (GASB) reporting requirements will increase the [retiree health] liabilities of many state and local government health plans in 2018.... This article describes strategies that many private companies have used to avoid a significant liability increase and can serve as a road map for public sector employers in dealing with GASB changes." (Benefits Quarterly, published by the International Society of Certified Employee Benefit Specialists [ISCEBS])
Supreme Court: Union Retiree Health Benefits Weren't Vested for Life
"In a unanimous decision, the Supreme Court reversed, determining that under ordinary contract principles the retiree health care benefits did not vest for life. The 1998 agreement was not ambiguous unless it could reasonably be interpreted as vesting health care benefits for life, the court noted. That was not possible in this case with the clause that ended the agreement in 2004. There also wasn't ambiguity from the tying of retiree benefits to pensioner status, according to the court." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Society for Human Resource Management [SHRM])
Supreme Court Once Again Refuses to Infer Lifetime Retiree Health Benefits
"A unanimous Supreme Court recently increased flexibility for employers struggling to manage retiree health costs. It ruled that, absent specific language to the contrary, retiree health benefit rights expire along with the collective bargaining agreement containing them -- meaning that an employer can modify those benefits after the CBA expires. This ruling follows the Court's 2015 decision to strike down the longstanding 'Yard-Man inference,' under which retiree health benefits were presumed to vest for life unless a collective bargaining agreement expressly provided otherwise." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Conduent)
Supreme Court Provides Good News for Sponsors of Union Retiree Medical Benefit Plans
"[T]he Supreme Court again admonished the Sixth Circuit not to rely on inferences. The Court held that a contract is not ambiguous unless it is subject, by its terms, to multiple interpretations and that the Sixth Circuit -- which was unique in its approach -- erred in its reliance on special inferences in favor of retirees." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Mayer Brown)
Supreme Court Concludes That Retiree Health Benefits Expired with CBA
"[T]he Supreme Court applied its 2015 Tackett holding in concluding that ordinary principles of contract law governed a dispute between retirees and their former employer over whether health benefits had vested under a collective bargaining agreement. Reiterating its rejection of the Sixth Circuit's Yard-Man inferences, the Court held that the health benefits at issue in this case expired with the collective bargaining agreement." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Thomson Reuters Practical Law)
Supreme Court Again Tells Sixth Circuit to Rethink Retiree Health Benefits
"The justices once again rejected the U.S. Court of Appeals for the Sixth Circuit's way of handling these disputes, which the justices said was rooted in inferences and assumptions and not the text of the applicable collective bargaining agreements. The result is a victory for CNH Industrial, which was sued for its attempt to modify the health-care benefits it provides for union retirees." [CNH Industrial N.V. v. Reese, No. 17-515 (U.S. Feb. 20, 2018, per curiam)] (Bloomberg BNA)
Court Determines Retiring Employees Had Vested Right to Benefits, But Required Scope of Benefits Is Jury Question
"Retired county workers who alleged their former employer breached its promise of cost-free retiree health coverage for life at the same level the employee enjoyed on his last day of employment will present their contract claims to a jury ... The court found the employees had a vested right to receive the same level of healthcare benefits in retirement as they received on their last day of work. However, it concluded that a jury would have to determine precisely what that level of benefits was supposed to be." [Wood v. Unified Gov't of Athens-Clarke County, Ga., No. 14-43 (M.D. Ga. Jan. 22, 2018] (Wolters Kluwer Law & Business)
The Cost of Healthcare for California Government Workers When They Retire Rises Sharply
"California taxpayers are on the hook for more than $91.5 billion to provide health and dental benefits to state government workers when they retire ... That's a substantial increase from last year's estimate, a result of changes in the way the total debt is calculated and changes in the projected cost of healthcare in the coming decades. Last year's report put the total liability at just under $77 billion." (Los Angeles Times)
[Official Guidance] Text of GASB Implementation Guide No. 2017-3: Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
248 pages. "Questions and answers in this Implementation Guide address issues related to accounting and financial reporting for postemployment benefits other than pensions and for plans that are used to administer those benefits." (Governmental Accounting Standards Board [GASB])
Retiree Health Benefits Ended When CBA Expired
"The Sixth Circuit Court of Appeals ... determined that an employer's promise to provide healthcare benefits for its retirees expired when the collective bargaining agreement (CBA) containing the commitment expired. In particular, the court found that the CBA's general-duration clause applied to the employer's promise to provide retiree healthcare benefits." [Watkins v. Honeywell International Inc., No. 17-3032 (6th Cir. Nov. 8, 2017)] (The Wagner Law Group)
Sixth Circuit Rejects Honeywell Retiree Claims that CBA Provided Lifetime Health Insurance Benefits
"The Sixth Circuit affirmed a district court's dismissal of a suit by retirees of Honeywell claiming the employer promised, in a collective bargaining agreement, to pay lifetime health insurance. The appeals court found that the general-durational clause in the CBA applied to the employer's promise to provide health care.... None of the retirees' evidence showed that the duration of the agreement contained a patent ambiguity that clearly appeared on the face of a document arising from the language itself." [Watkins v. Honeywell International Inc., No. 17-3032 (6th Cir. Nov. 8, 2017)] (Wolters Kluwer Law & Business)
Text of Amicus Brief to Supreme Court on Vesting of Retiree Health Benefits
28 pages. "Employers and employees cannot meaningfully bargain or reliably plan for the future in the chaotic legal landscape the Sixth Circuit has created. The massive unexpected costs and unpredictable benefits packages that will result (and, indeed, have already resulted) hurt employers and retirees alike.... [T]he Sixth Circuit's effective presumption in favor of vested, frozen-in-time benefits makes it more difficult for parties to achieve the flexibility they intended. Moreover, the Sixth Circuit's outlier rule will undoubtedly result in large-scale forum shopping." [CNH Industrial N.V. v. Reese, No. 17-515, cert. pet. filed Oct. 3, 2017; appeal from Reese v. CNH Industrial N.V., No. 15-2382 (6th Cir. Apr. 20, 2017)] (Chamber of Commerce of the United States of America, National Association of Manufacturers, American Benefits Council, and Business Roundtable)
Accounting for Pensions and Other Postretirement Benefits, 2017 (PDF)
28 pages. "At fiscal year-end 2016, the average discount rate used to calculate the present value of pension obligations decreased to 4.03%, compared with the 2015 rate of 4.33%.... The average projected benefit obligation (PBO) funded status (plan assets/PBO) was 81% at fiscal year-end 2016, a minor uptick from the 2015 level of 80%.... The fiscal year-end 2016 discount rate for other postretirement benefits ranges from 2.84% to 6.63% in the current survey, with an average of 4.04%. At fiscal year-end 2015, discount rates for companies included in this year's report ranged from 3.25% to 6.47%, with an average value of 4.28%." (Willis Towers Watson)
ERIC Files Amicus Brief with the Supreme Court in Critical Retiree Health Case
"ERIC's brief lays out two reasons the Court should review the case: The Sixth Circuit's decision violates the Supreme Court standard set by the M&G Polymers v. Tackett case regarding how the duration of a retiree health benefit should be interpreted, and The Sixth Circuit's decision was reached by applying a test which the Supreme Court had affirmatively thrown out in Tackett." (The ERISA Industry Committee [ERIC])
Five Important Ages for Retirement Planning
"At age 50, your employees will become eligible to save more the standard amount in their 401(k) and IRA accounts ... By waiting until the age of 59-1/2 to take a withdrawal, your employees will get to keep an additional 10% of their money.... Your employees will be able to sign up for Medicare during a seven-month period starting three months prior to their 65th birthday.... Baby boomers born between 1943 and 1954 will be eligible to begin claiming the full Social Security benefit they've earned at age 66.... Whether it's needed or not, they'll be required to take distributions from their traditional IRAs, traditional 401(k)s and Roth 401(k)s after age 70-1/2." (Voya)
Kraft Retirees Had No Vested Right to Health Care Benefits Beyond Termination of CBAs
"Kraft contended there was nothing in the language of the relevant [collective bargaining agreements (CBAs)], [memoranda of agreements (MOAs)] or SPDs that promised to provide medical benefits to retirees that would continue beyond the termination of the CBA in effect when the individual retired or that the medical benefits could never be changed.... [T]he relevant SPDs both expressly provide a right to 'amend or terminate' the health plan at any time... [T]he court declined to consider extrinsic evidence offered by the union in an effort to demonstrate vested rights." [Gruss v. Kraft Heinz Foods Co., Inc., No. 15-788 (W.D. Wis. Sept. 15, 2017)] (Wolters Kluwer Law & Business)
[Guidance Overview] Retiree HRAs Receiving More Attention from California Public Employers
"Retiree-only HRAs [RHRAs] can provide significant tax-free health benefits and, if structured properly, can help [California] public employers address budgetary and compliance problems ... An RHRA can be used to automatically and, on a mandatory basis, convert some or all of the accumulated PTO into nontaxable retiree health benefits. [California agencies] that wish to eliminate or cut back their FLSA/overtime exposure can offer RHRA contributions in place of current cash-in-lieu benefits." (Best Best & Krieger LLP)
Ninth Circuit Faults Retiree Plan's Disclosure of Lifetime Maximum
"The ACA's detailed amendments to the Public Health Service Act (PHSA) included a prohibition on group health plans or their insurers setting lifetime limits on benefits for any participant or beneficiary.... [A] blanket provision [stated] that the amended PHSA provisions would apply to ERISA group health plans 'as if included in this subpart.' This part of ERISA (Part 7) includes an exception for certain plans with fewer than two active employees. However, King argued that the ACA superseded this provision, especially since it eliminated a similar PHSA provision for certain retiree-only plans. The court ruled that the ACA ban did not apply to retiree plans ... Any inconsistency that was created between PHSA and ERISA is not so drastic that plans cannot comply with both, [the judge wrote]." [King v. Blue Cross and Blue Shield of Ill., No. 15-55880 (9th Cir. Sept. 8, 2017)] (HR Daily Advisor)
Lifetime Dollar Limit Was Permitted Under Retiree-Only Plan, But Was Not Adequately Disclosed in SPD
"A participant in a self-insured retiree-only plan challenged the plan's imposition of a lifetime dollar limit on benefits, asserting that health care reform prohibited such limits for essential health benefits and that the limit had not been adequately disclosed to participants, in violation of ERISA's requirements. The trial court held that the prohibition against lifetime dollar limits did not apply to retiree-only plans and rejected the participant's fiduciary breach claims against the employer, plan, and claims administrator but did not address the participant's ERISA disclosure argument." [King v. Blue Cross and Blue Shield of Ill., No. 15-55880 (9th Cir. Sept. 8, 2017)] (Thomson Reuters / EBIA)
Ninth Circuit: ACA Does Not Prohibit Lifetime Benefit Maximum for Certain Retiree-Only Health Plans
"[T]he court held that ERISA, as amended by the [ACA], does not ban lifetime benefit maximums for certain retiree-only plans. Plaintiff argued, but the court rejected, that the exception in 29 U.S.C. Section 1191a(a) has been impliedly repealed by the ACA's amendments to the Public Health Service Act [PHSA] which introduced a ban on lifetime benefit limits, but also eliminated a similar exception for certain retiree-only plans. The court did not see that the lifetime benefit limits in the PHSA and the exception for certain retiree-only plans in ERISA are in irreconcilable conflict." [King v. Blue Cross & Blue Shield of Ill., No. 15-55880 (9th Cir. Sept. 8, 2017)] (Kantor & Kantor)
CONSOL Energy Sued Again Over Retiree Healthcare Cuts
"CONSOL concealed the terms of its retirement and health-care plans and made 'regular, repeated, and material misrepresentations' about the lifetime nature of benefits available to nonunion supervisors and hourly employees, according to a lawsuit filed Aug. 23 in federal court in West Virginia." (Bloomberg BNA)
Seventh Circuit Confirms: No Age Discrimination Claims for Rehired Retirees Terminated to Preserve Health Plan's Retiree-Only Status
"Noting that the employer had not terminated employees age 65 or over who were not enrolled in the plan, and that there was no evidence of impermissible stereotyping, the court concluded that the employer had decided to terminate the retirees' reemployment because of the advice received about the adverse health care reform and MSP implications of allowing rehired retirees to continue participating in the retiree health plan, rather than because of their age." [Carson v. Lake County, Indiana, No. 16-3665 (7th Cir. July 26, 2017)] (Thomson Reuters / EBIA)
The HSA in Your Future: Defined Contribution Retiree Medical Coverage
"[O]nly 24% of employers with 200 or more employees offer retiree health coverage ... The percentage of smaller employers offering retiree medical coverage is much, much less.... [L]ess than 5% of America's workers have access to and save on a tax-favored basis for future medical expenses -- including HSA-qualifying expenses[.]" (Plan Sponsor Council of America [PSCA])
Seventh Circuit: No ADEA Violation When Rehired Retirees Were Terminated to Preserve Supplemental Health Insurance Coverage and Avoid Additional Costs
"The Seventh Circuit's decision ... aptly illustrates the difficulty plaintiffs encounter in ADEA cases with the 'but-for' standard of causation. [The case] also underscores the importance of employers not making or acting on 'stereotypical assumptions' about the capabilities of older employees based on their enrollment in Medicare or a Medicare supplemental insurance plan or pension eligibility or using age as the determining factor in employment decisions." [Carson v. Lake County, Indiana, No. 16-3665 (7th Cir. July 26, 2017)] (Ford & Harrison LLP)
ASBCA Grants $253 Million Northrop Post-Retirement Benefits Claim
"In rejecting DCMA's form-over-substance argument, the [Armed Services Board of Contract Appeals (ASBCA)] signaled that it will take a harder look at whether a contractor's noncompliance with a regulation was material and whether the claimed costs are valid and were incurred even if there has been a technical discrepancy in the contractor's cost accounting practices. While contractors must still comply with cost accounting rules, the ASBCA's decision strikes the right balance in situations where the contractor takes a good faith position that deviates from the applicable rules but the government denies a claim due to a technicality." (Blank Rome LLP)
Whirlpool's Retiree Health Benefit Cuts Go Down the Drain
"After previously finding that Whirlpool owed lifetime health benefits to many of its retirees, the judge ruled July 27 that Whirlpool couldn't fulfill this obligation if it carried out its plan to raise premiums, deductibles, copayments, and out-of-pocket maximums. The parties to the relevant collective bargaining agreements couldn't have intended to give Whirlpool latitude to make these modifications, because the agreements expressly established specific premiums, deductibles, and other terms while providing no mechanism for altering them, the judge said." [Zino v. Whirlpool Corp., No. 11-1676 (N.D. Ohio July 27, 2017)] (Bloomberg BNA)
Early Retirement Health Care Quandary Keeps Workers on the Job
"Many employees who would like to retire stay on the job so that they can keep their health care coverage. Employers that want to help ease their transition can look into private health care exchanges and the [ACA's] public marketplace exchanges for opportunities to subsidize coverage without having to maintain a group health plan for former employees." (Society for Human Resource Management [SHRM])
[Guidance Overview] GASB 75: Proportionate Share Allocations for Cost-Sharing Employers (PDF)
"For cost-sharing plans, a 'proportionate share' for each employer must be developed to distribute the aggregate plan liability, deferred items, and expense among the employers' financial statements. Note that under GASB 75, the component government units of a single-employer plan may be required to provide a similar division of accounting metrics using the rules for cost-sharing plans." (Milliman)
Changing Retiree Medical Plan Benefits to Reduce OPEB Liabilities Under Governmental Accounting Rules (PDF)
"GASB 74 became effective for financial statements for fiscal years beginning after June 15, 2016. As governmental employers have begun to determine and report OPEB liabilities, a question has arise n similar to a question that had earlier arisen in the context of reporting pension liabilities -- whether the governmental employer can make changes to the plan to reduce the amount of liabilities." (Groom Law Group)
General Electric Escapes Retirees' Health Benefits Lawsuit
"The retirees failed to show that they were sufficiently harmed by General Electric's fiduciary conduct with respect to the plans, so they lack standing to sue the company for breach of its fiduciary duties under [ERISA], Judge Lynn Adelman held June 15. Granting summary judgment to General Electric, Adelman held that most of the retirees' alleged injuries didn't amount to an 'injury in fact' and thus were insufficient to grant them standing." [Kauffman v. General Electric Co., No. 14-1358 (E.D. Wis. June 15, 2017)] (Bloomberg BNA)
[Opinion] Why Employers Need to Offer Retiree Healthcare Benefits
"An average 65-year-old couple today will need $265,000 to cover out-of-pocket healthcare expenses in retirement ... [E]mployers need to start thinking about retiree health -- and how it affects both employees and institutions -- today. Planning conversations with employees should include accounting for healthcare expenses as part of a comprehensive health and wealth strategy. And to further support their workforce, employers should consider providing retiree healthcare benefits as a part of their total benefits package." (Timothy E. Lane, via Employee Benefit News)
Fourth Circuit Panel Reaffirms Finding That Retiree Benefits Were Not Vested
"Finding once again that the plain language of the applicable collective bargaining agreements and summary plan descriptions indicated there was no intent to vest retiree health benefits, a Fourth Circuit panel held on rehearing that a district court properly granted summary judgment to an employer in a suit brought by retirees and their union challenging the company's right to unilaterally alter those benefits." [Barton v. Constellium Rolled Products-Ravenswood, LLC, No. 16-1103 (4th Cir. May 11, 2017)] (Wolters Kluwer Law & Business)
Retiree Health Care Benefits for State Employees in Fiscal Year 2015 (PDF)
"In 2015, approximately 80 percent of state government units offered health insurance to retirees under age 65 and approximately 70 percent offered the benefit to those over age 65.... This report focuses on OPEB finances for states and state agencies, and all relevant data are sourced from state and statewide retirement system financial reports. A list of the agencies responsible for administering retiree healthcare plans reflected in this report is [included]." (National Association of State Retirement Administrators [NASRA])
Widening Gap in U.S. Life Expectancy Based on Geographic Location
"[R]ecent gains in longevity aren't being enjoyed equally in all corners of the United States. In fact, depending on where you live in this great country, life expectancy can vary more than 20 years -- a surprisingly wide gap that has widened significantly in recent decades. Researchers attribute this disturbing gap to a variety of social and economic influences, as well as differences in modifiable behavioral and lifestyle factors, such as obesity, inactivity, and tobacco use." (National Institutes of Health)
Recent Developments in U.S. Law Affecting Pension and OPEB Claims in Restructurings
27 pages. "From theory to practice, planning to enforcement, the answers to 42 of the most frequently asked questions can help you prepare, cope or respond to a restructuring.... Understanding the treatment of pension and OPEB obligations in bankruptcy continues to be important in today's business environment and the law relating to the treatment of these obligations continues to evolve." (Latham & Watkins)
[Official Guidance] Text of GASB Implementation Guidance No. 2017-2: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
118 pages. "The objective of this Implementation Guide is to provide guidance that clarifies, explains, or elaborates on the requirements of Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended.... The requirements of this Implementation Guide apply to the financial statements of all state and local governments." (Governmental Accounting Standards Board [GASB])
 
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