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Health plans - retiree coverage

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Nearly 23,000 Coal Miners to Lose Healthcare Benefits
"Almost 23,000 retired coal miners and their dependents on Wednesday received official notification that they could lose their health care benefits by April 30." (The Intelligencer)
Honeywell Gets Mixed Results in Courts Over Retiree Health Cuts
"Honeywell International Inc. can't cut lifetime health-care benefits to retirees of a Greenville, Ohio, plant, a federal judge held Feb. 28 ... The decision is the latest setback for Honeywell in its efforts to reduce health-related expenses by eliminating lifetime coverage for retirees and their dependents. Honeywell's 2015 plan to terminate retirees' health benefits resulted in four lawsuits in federal courts in Connecticut, Michigan and Ohio. So far, two courts have ruled in favor of the retirees and one in favor of Honeywell. Another court gave a partial win to the company, holding that the cuts were allowed for some retirees." [Fletcher v. Honeywell Int'l, Inc., No. 16-302, (S.D. Ohio Feb. 28, 2017)] (Bloomberg BNA)
Older Workers and Retirees: Avoiding HSA Pitfalls
"Employers sponsoring HDHP/HSA programs for older workers need to be aware of the potential complications caused by Medicare Part A entitlement while those offering HDHP/HSA programs for retirees need to be concerned about the HSA comparability rules. Failure to address these issues can result in participant aggravation and potential excise taxes." (Conduent)
Retiree Benefits: A Tale of Two Cities (States)
"Many states' combined costs -- pensions, other post-employment benefits (OPEBs) such as health insurance, and payments on all government bonds -- appear manageable. More worrisome are the eight states with the highest combined costs: Illinois, New Jersey, Connecticut, Hawaii, Kentucky, Massachusetts, Rhode Island, and Delaware. [States with high pension burdens also tend to have high costs for retiree health benefits].... [T]he picture overall [for cities] is a mix of a handful of deeply troubled jurisdictions and many where the costs appear manageable. The eight major cities with the highest total cost burdens range from the predictable -- Chicago and Detroit -- to surprises such as Wichita, Kansas, and Portland, Oregon." (Squared Away Blog, by the Center for Retirement Research at Boston College)
Honeywell Loses Round Over Retiree Health Cuts, Moves to Trial
"The language 'for the life of the retiree or surviving spouse,' included in collective bargaining agreements, unambiguously provided a contractually vested right to lifetime full medical coverage benefits, [the court ruled]. People who retired before the expiration of the CBA are entitled to lifetime benefits, but those who retired after the expiration date will move to trial to determine whether their benefits were vested at the time they retired[.]" [Kelly v. Honeywell Int'l, Inc., No. 16-543 (D. Conn. Feb. 8, 2017] (Bloomberg BNA)
[Guidance Overview] Surplus Assets Locked in 401(h) Accounts: Is There a Key (PDF)
"[In] PLR 201611003, the IRS ruled that the use of a Section 401(h) account to reimburse certain retirees covered under the pension plan for eligible medical insurance premiums under an HRA plan will not violate Section 401(h) or cause the pension plan to lose its qualified status ... . While GCM 39785 makes it clear that a VEBA cannot transfer funds to a Section 401(h) account, it is not entirely clear whether the converse is true ... The IRS has recently ruled that a governmental entity can transfer excess Section 401(h) account money outside the pension plan to a Section 115 trust ... Without any guidance on orphan accounts, and without any alternatives to avoid the severe taxes imposed on the legally-required reversion, employers should be careful when terminating a pension plan with an over-funded Section 401(h) account." (Groom Law Group)
How Much Should a Medicare Beneficiary Save for Health Expenses? Some Couples Need $350,000 (PDF)
"In 2016, a 65-year-old man would need $72,000 in savings and a 65 year-old woman would need $93,000 if each had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement.... A couple with median prescription drug expenses would need $165,000 if they had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement.... For a couple with drug expenses at the 90th percentile throughout retirement who wanted a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings would be $349,000 in 2016." (Employee Benefit Research Institute [EBRI])
How COBRA Intersects with Medicare and Retiree Health Plans
"If an employer offers retiree health coverage that is a non-COBRA alternative to COBRA coverage for eligible retirees, then the retirees are still considered 'covered employees' for COBRA purposes." (HR Daily Advisor)
Ford Takes a $2 Billion Charge Due to Pensions, Benefits
"The automaker is changing how it values pensions and other retiree obligations and is now counting them in the year they were incurred instead of spreading out the impact over a number of years." (USA TODAY)
Sen. McConnell Introduces Bill to Fund Coal Miner Health Plans
"Top Senate Republican Mitch McConnell on [January 17] introduced legislation to maintain health benefits for retired union coal miners whose companies have declared bankruptcy in recent years. McConnell was among those who successfully worked last year to provide a four-month extension of health benefits that protected 16,000 miners whose benefits would otherwise have been cut off on Jan. 1." (Associated Press)
Honeywell Retirees Appeal Dismissal of Claim for Lifetime Health Care Benefits
"Retirees of Honeywell International Inc. have appealed an Ohio federal judge's ruling that found the company did not need to pay them lifetime health care benefits.... Through a series of collective bargaining agreements, each of which had a specific term of about three years, Honeywell provided health care benefits to the plaintiffs. Honeywell continued to contribute for several years after the final agreement expired." (
California State Pension Costs Doubled After Rate Increases
"State payments to CalPERS next fiscal year are expected to total $6 billion, nearly double the $3.2 billion paid six years ago before a wave of employer rate increases.... [S]tate payments to CalSTRS for the fiscal year beginning in July are expected to be $2.8 billion, nearly double the $1.5 billion paid three years ago when a rate increase began. Meanwhile, what had been the fastest-growing annual retirement cost in the budget, retiree health care for state workers, only increased by about half during the last six years, going from $1.5 billion in fiscal 2011 to $2.2 billion next year." (Calpensions)
Fortune 1000 Companies: Accounting for Pensions and Other Postretirement Benefits, 2016
"At fiscal year-end (FYE) 2015, the average discount rate used to calculate the present value of pension obligations increased to 4.34%, compared to last year's rate of 3.98% for companies in this year's report. The salary scale assumption at FYE 2015 used to project current pay remained essentially unchanged at an average value of 3.60%. For companies in this year's report, the expected rate of return on asset assumptions decreased 18 basis points, down to 6.95% from FYE 2014 to FYE 2015." (Willis Towers Watson)
District Court Rejects Retirees' Claim for Lifetime Healthcare Benefits
"[T]he court first observed that the agreements were for three-year terms and did not expressly state that the healthcare benefits vested, whereas the pension plan documents stated that Plaintiffs' pension benefits were lifetime benefits. Next, the court observed that several of the agreements restated and sometimes redefined the healthcare benefits available going forward, which would be unnecessary if the benefits had vested." [Sloan v. BorgWarner, Inc., No. 9-10918 (E.D. Mich. Dec. 5, 2016)] (Proskauer's ERISA Practice Center)
How COBRA Intersects with Medicare and Retiree Health Plans
"If an employer offers retiree health coverage that is a non-COBRA alternative to COBRA coverage for eligible retirees, then the retirees are still considered 'covered employees' for COBRA purposes. Furthermore, the Medicare statutory rules allow employer-sponsored group health plans to reduce or terminate coverage if retired employees become entitled to Medicare. Thus, if a covered retiree becomes entitled to Medicare, and that entitlement would cause a loss of coverage for his or her spouse and dependents under the terms of the employer's retiree coverage, then a qualifying event has occurred." (HR Daily Advisor)
Honeywell's Retiree Health Cuts Divide Federal Judges
"The planned benefit cuts have spawned at least four proposed class actions by retirees from Honeywell plants in Connecticut, Michigan and Ohio. In ruling ... that the cuts didn't violate the retirees' collective bargaining agreements, Judge James G. Carr of the U.S. District Court for the Northern District of Ohio broke from both of the other judges who have ruled on these cases." [Watkins v. Honeywell, No. 16-1925 (N.D. Ohio Dec. 16, 2016)] (Bloomberg BNA)
Government Funding Secured with Support for Coal Miners; Comprehensive Health Care Bill Passed (PDF)
"The [Continuing Resolution (CR)] enacted last week to avert a government shutdown also included $45 million for retired coal miners' multiemployer health benefits.... [H]ealth and retiree benefits remain in jeopardy because funding for health benefits is provided only through April 28 (consistent with the duration of the CR) and no funding has been provided for pension benefits.... [L]egislation for so-called 'composite plans' seems to have fallen off the radar." (Xerox HR)
California Retiree Health Care Debt Bigger Than Pensions
"Until recently, [California] state workers have not paid for a remarkably generous retiree health plan that actually pays more of their health care premium when they retire.... The state paid $458 million in 2001 (0.6 percent of the general fund) for state worker retiree health care and this fiscal year is expected to pay $2 billion (1.7 percent of the general fund) ... The state payment for CalPERS pensions is $5.4 billion. Now pay-as-you-go state worker retiree health care, unaided by investment earnings, has created a long-term debt for state worker retiree health care that is larger than the debt for state worker pensions." (Calpensions)
Canaries in the Coal Mine on Pension Bailouts
"Participants in the United Mine Workers of America 1974 (UMWA) Pension Plan are unlikely to see any significant cuts in their benefits primarily because the average retiree receives about $6,900 annually, far less than the PBGC guarantee ... [It] is those health care benefits that will cease for 22,000 retirees at the end of this year that primarily worries senators like West Virginia's Joe Manchin[.]" (Burypensions)
The High Cost of Living Longer: Women and Retirement Health Care (PDF)
"[W]omen, on average, will pay more for health care in retirement than men, but the reason is primarily because of longevity, not the use of medical services.... [A] healthy 55-year-old woman will pay $522,827 ($253,594 in today's dollars) in retirement health care expenses -- almost $79,000 more than a male -- because she will live two years longer. Looking ahead, because of rising health care inflation and an additional year of life expectancy, a 45-year-old single female will pay 27.5% more in health care costs than a male of the same age." (HealthView)
McConnell Insists on Extending Coal Miners' Health Benefits in Funding Bill
"Senate Majority Leader Mitch McConnell ... is pushing to include an extension of health benefits for retired coal miners in a must-pass government funding measure. More than 16,000 retired coal miners stand to lose their health benefits at the end of the year." (Morning Consult)
2016 Retirement Confidence Survey of the State and Local Government Workforce (PDF)
25 pages. "One-third of public sector employees have been with their current employer for less than 10 years, and one-third for 20 years or longer.... Health insurance, retirement benefits, job security and salary are the most important job elements they would consider in deciding whether to switch employers. The vast majority are covered by a primary defined benefit pension plan; almost 20 percent of these workers reported changes to these benefits over the past two years. Two-thirds expect to receive retiree healthcare benefits from an employer when they retire; among these, one-quarter reported changes to their benefits over the past two years." (TIAA Institute, and the Center for State and Local Government Excellence)
Health Reform and Health Insurance Coverage of Early Retirees
"[B]etween 2013 and 2014, the fraction of early retirees without health insurance declined significantly from 14.7 percent to 11.2 percent ... Gains in coverage were larger in states that implemented the [ACA]'s Medicaid expansion in January 2014 than in states that did not. The gains in coverage disproportionately benefited low-income early retirees ... There is no evidence of an acceleration of the decline in employer-sponsored coverage for early retirees, either overall or in states that expanded Medicaid." (Michigan Retirement Research Center [MRRC])
[Guidance Overview] CMS Announces 2017 Medicare Parts A & B Premiums and Deductibles
"Because of the low Social Security COLA, a statutory 'hold harmless' provision designed to protect seniors, will largely prevent Part B premiums from increasing for about 70 percent of beneficiaries. Among this group, the average 2017 premium will be about $109.00, compared to $104.90 for the past four years. For the remaining roughly 30 percent of beneficiaries, the standard monthly premium for Medicare Part B will be $134.00 for 2017, a 10 percent increase from the 2016 premium of $121.80. Because of the 'hold harmless' provision covering the other 70 percent of beneficiaries, premiums for the remaining 30 percent must cover most of the increase in Medicare costs for 2017 for all beneficiaries." For detailed official announcements of the 2017 amounts see: [1] Medicare Part A Premiums; [2] Medicare Part B Premiums and Deductibles; and [3] Medicare Inpatient Deductible and Coinsurance Amounts. (Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS])
The ACA as Retiree Health Insurance: Implications for Retirement and Social Security Claiming
"An analysis based on a structural retirement model suggests that eventually ACA will increase the probability of retirement by those who initially had health insurance on the job but did not have employer-provided retiree health insurance. But the retirement increase is quite small, only about half a percentage point at each year of age. The model also suggests that much of the effect of ACA on retirement will be realized within a few years of the change in the law." (Michigan Retirement Research Center [MRRC])
SEC Comment Letter Trends: Pension and Other Postretirement Benefits (PDF)
13 pages. "This publication includes an analysis of comments made by the SEC staff to registrants published on the SEC's website between July 1, 2015 and June 30, 2016 related to pensions and postretirement benefits other than pensions (OPEB).... 70% of the comments received related to Form 10-K filings. When evaluated by section of the filing, 58% of the total number of comments received related to the financial statements. When evaluated by topical area, 34% of the comments related to disclosure and 17% related to assumptions." (PricewaterhouseCoopers)
[Official Guidance] Text of GASB Exposure Draft of Proposed Implementation Guide: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
129 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.... The requirements of this Implementation Guide apply to the financial statements of all state and local governments." (Governmental Accounting Standards Board [GASB])
[Guidance Overview] Medicare Creditable Coverage Disclosures Due before October 15th
"The disclosure requirement does not apply to account-based medical plans such as health savings accounts (HSAs), health flexible spending accounts (health FSAs), or Archer medical savings accounts (Archer MSAs). However, disclosures would be required for HDHPs and other non-account benefits available to participants with these account types, to the extent the HDHP or other non-account benefit offers prescription drug coverage." (Ice Miller LLP)
An Overview of the Pension/OPEB Landscape
"This paper provides a comprehensive accounting of pension and OPEB liabilities for state and local governments and the fiscal burden that they pose. The analysis includes plans serving more than 800 entities: 50 states, 178 counties, 173 major cities, and 415 school districts related to the sample of cities and counties.... The cost analysis calculates, separately, pension and OPEB costs as a percentage of own-source revenue for states, cities, and counties. It then combines pension and OPEB costs to obtain the overall burden of these programs." [Data figures (XLS) also available.] (Center for Retirement Research at Boston College)
Medicare Advantage Premiums Remain Stable in 2017; Beneficiaries Have Saved Over $23.5 Billion on Prescription Drugs
"CMS estimates that the average Medicare Advantage monthly premium will decrease by $1.19 (about 4 percent) in 2017, from $32.59 on average in 2016 to $31.40. This would be 13 percent lower than the average Medicare Advantage premium prior to passage of the [ACA].... Since the enactment of the [ACA] ... more than 11 million seniors and people with disabilities have received savings and discounts in the coverage gap of over $23.5 billion on prescription drugs, an average of $2,127 per beneficiary[.]" (Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS])
Honeywell Not Required to Arbitrate Retiree Health Cuts
"This proposed class action between Honeywell and retirees of a Greenville, Ohio, plant is one of at least three pending lawsuits challenging the company's decision to terminate retiree health coverage for certain workers beginning in 2017. On Sept. 13, a federal judge in Ohio overruled the Greenville retirees' request for arbitration and partly dismissed their lawsuit, reasoning that Honeywell only agreed to arbitrate with unions and employees, and not with former workers or retirees." [Fletcher v. Honeywell Int'l, Inc., No. 16-00302 (S.D. Ohio Sept. 14, 2016)] (Bloomberg BNA)
[Official Guidance] Text of DOL FAQs for Participants and Beneficiaries Following the Louisiana Storms (PDF)
22 Q&As address issues for employees whose employers are closed or whose records are unreachable as a result of the Louisiana storms. The guidance addresses various plan administration issues for retirement and health plans, including employee and employer contributions or premium payments, benefit claims and payments, investment allocations, QDROs, COBRA, and how to locate a person to contact for purposes of benefit claims, applying for a participant loan, etc. (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Coal Miners Advance Lawsuit for Retiree Health Coverage
"[A] group of retirees accused Mystic and its majority owner of purposefully draining the company of assets before it ceased operations in 2006. According to the retirees, this was done to avoid the company's ongoing obligation to provide health benefits to retired mineworkers. Weighing these state law claims for breach of contract and unlawful distribution, Judge Irene C. Berger of the U.S. District Court for the Southern District of West Virginia found the lawsuit to be preempted by ERISA." [Int'l Union, United Mine Works of America v. Mystic, LLC, No. 16-02030 (S.D. W. Va. Sept. 2, 2016)] (Bloomberg BNA)
Bill to Shield Retired Miners Divides Coal-State Republicans
"Retirement and health-care funds currently support about 120,000 former miners and their families nationwide. But account balances have dwindled amid continued layoffs and bankruptcy filings as the coal industry struggles against competition from cheaper natural gas and tightening environmental regulations. The bill would ensure that retired miners receive hundreds of millions of dollars in benefits now at risk amid the industry's steep decline. Without congressional intervention, some of the funds could run out of cash by next year[.]" (The Republic)
[Guidance Overview] Current Issues Affecting Pension Plan 401(h) Accounts (PDF)
"Section 401(h) account overfunding has given rise to numerous issues for plan sponsors.... Recent developments in financial accounting may affect plan sponsors with 401(h) accounts, too. [The authors] briefly discuss both topics ... and recommend that affected plan sponsors work with legal counsel to identify reasonable approaches to maximize the use of 401(h) account assets consistent with the limited guidance currently available." (Groom Law Group)
[Guidance Overview] GASB 74/75: Impact on Small Government Employers (PDF)
"An employer is qualified to use the [Alternative Measurement Method (AMM)] if fewer than 100 employees (active and inactive) are eligible for OPEB through the plan as of the beginning of the measurement period. The AMM includes the same broad steps as an actuarial valuation, including projecting benefit payments, discounting those payments to a present value, and attributing the present value of projected benefit payments to time periods using an actuarial cost method. However, the AMM permits some simplified methods for setting the assumptions to be used in the calculation." (Milliman)
Using 401(h) Assets to Pay Retiree HRA Claims
"This type of arrangement must comply with the requirements for both HRAs and 401(h) accounts. The interaction of these two sets of rules creates a number of technical uncertainties, which were favorably resolved in [PLR 201611003]. Unfortunately, the IRS did not provide a detailed rationale for its conclusion." (Willis Towers Watson)
Golden Years for Retiree Health Benefits
"With an increase in doctors scorning Medicare, an explosion in prescription drug costs, the ACA closing of the Part D 'donut hole', the emergence of a new trend in retiree products, (i.e. EGWP, Medicare Advantage, RRAs) and the advent of healthcare exchanges offering affordable protection to young retirees, a new shift is firmly underway. Even the most paternalistic employers are reexamining their retiree product portfolios and the overall justification for staying in the retiree market." (Frenkel Benefits)
The Evolving Group Retiree Pharmacy Benefits Landscape
"Financial dynamics and an evolving regulatory environment continue to influence the value of [Employer Group Waiver Plans (EGWPs)] and Retiree Drug Subsidy (RDS) plans in the group retiree pharmacy benefits market. Plan sponsors should periodically evaluate the effect of emerging trends on RDS and EGWP programs to optimize the plan value as the market continues to evolve." (Milliman)
It's Key to Factor in Health Costs When Saving for Retirement
"According to Fidelity Investments, the average 65-year-old couple retiring this year are likely to spend $245,000 on medical care not covered by Medicare -- 29 percent more than they did 10 years ago. That figure doesn't include long-term care, which can run as high as $200,000 a year for a private room in a nursing home. The data from the Employee Benefits Research Institute are even grimmer. A 65-year-old couple who would like a 90 percent chance of having enough money for lifetime health care should set aside $392,000. Health-related costs are rising by twice the rate of overall inflation." (CNBC)
Employers Confident Public Health Insurance Exchanges Will Be an Option for Pre-65 Retiree Coverage Within Two Years
"More than half (56%) of U.S. employers are confident that public health insurance exchanges will be a viable alternative to group health plans for pre-65 retirees by 2018 ... 72% of employers plan moderate to significant changes in pre-65 retiree health benefits over the next four years.... [E]mployers expect a 4.1% cost increase for pre-65 retiree health care after plan changes or 5.7% without plan changes in 2016. This compares with an expected 2.0% cost increase for Medicare-eligible retiree health care after plan changes or 3.3% before plan changes this year." (Willis Towers Watson)
Arbitrator Rules That City's Unilateral Increase in Retiree Health Insurance Premiums Violated Collective Bargaining Agreement (PDF)
"[An arbitrator] recently ruled that the City of Syracuse violated its collective bargaining agreement with the Syracuse Firefighters, Local 280, IAFF, AFL-CIO, when it unilaterally increased the health insurance premium contributions that hundreds of retired firefighters were required to make to maintain coverage.... [T]he City was ordered to restore the lower, negotiated rates and reimburse a class of affected retirees tens of thousands of dollars in overpaid contributions. Additionally, the Arbitrator made clear that the City is strictly prohibited from raising retiree health insurance premium contributions in the future absent agreement with Local 280." (Blitman & King LLP)
Younger Seniors Amass More Costs for End-of-Life Care Than Oldest Americans
"Medicare claims data for 2014 for beneficiaries who died the same year shows that average Medicare spending per person peaked at age 73 -- at $43,353 ... That compared with $33,381 per person for 85-year-olds and among 90-year-olds, $27,779 per person.... researchers said their findings suggest that providers, patients and their families may favor more costly, lifesaving care for younger seniors, and turn to hospice care when patients are older." (Kaiser Health News)
Survey Finds Concerns About GASB's OPEB Accounting Changes, Yet Relatively Few Actions Taken to Mitigate the Impact (PDF)
11 pages. "A large percentage (57 percent) [of responding jurisdictions] have either completed, nearly completed or partially implemented a Medicare Advantage group waiver plan for their Medicare eligible retirees, but only a few have considered or are acting on eliminating retiree health benefits entirely. Also, about 30 percent of the responding jurisdictions indicated that they are moving toward a defined contribution funding approach for retiree health benefits." (Segal Consulting)
[Guidance Overview] GASB 74/75: Depletion Date Projections by Public Pension Plans (PDF)
"Required implementation is imminent, with GASB 74 effective for plan fiscal years beginning after June 15, 2016, and GASB 75 effective for employer fiscal years beginning after June 15, 2017.... This article ... focuses on the determination of a plan's depletion date, which is the projected point in the future (if any) when plan assets are no longer sufficient to satisfy benefit obligations. It also looks at the impact on liability calculations that will result from a conclusion that a depletion date exists. Unlike pension plans, many other postemployment benefits (OPEB) plans are not pre-funded through a dedicated trust. These plans, and pension plans that fall under GASB 73, will not have to prepare depletion date analyses. However, GASB 75 (or GASB 73 for pension plans that are not pre-funded) will impact the selection of the discount rate." (Milliman)
[Opinion] Retiree Health Costs: California Gets Some Bad News and Some Not-So-Bad News
"[California's] unfunded retiree health obligation (well in excess of $65 billion) has now surpassed its unfunded pension obligations -- and, more importantly, there is no statutory or administrative construct in place (like CalPERS) to force State agencies, cities and local governments to properly fund for these growing obligations." (Chang Ruthenberg & Long PC)
Weyerhaeuser Faces ERISA Lawsuit Over Retiree Benefits Cuts
"Weyerhaeuser in January 2015 unilaterally terminated its contributions to the retirees' health plan in violation of [ERISA], according to a complaint filed June 8 ... The retirees seek reinstatement of their benefits and $7.8 million in damages allegedly suffered after the company stopped making contributions to the plan.... The proposed class includes retirees and their eligible spouses whose rights to health-care benefits ... had been affected by terminations, reductions or changes since December 2010. The class could include between 4,000 and 5,000 individuals, the complaint says." (Bloomberg BNA)
[Guidance Overview] GASB 73/74/75: Timing Considerations for Compliance with New Financial Reporting Rules (PDF)
"There are several important dates to consider when calculating and reporting OPEB liability ... For plan reporting, the actuarial valuation must have been performed as of a date no more than 24 months prior to the plan's FYE. For employer reporting, the actuarial valuation must have been performed as of a date no more than 30 months and one day prior to the employer's FYE.... The measurement date is the date as of which the net OPEB liability is measured ... For purposes of GASB Statement Nos. 73 and 75, the measurement date may be selected from a range starting no earlier than the end of the employer's prior FYE and ending no later than the employer's current fiscal year." (Milliman)
Employers Look to Private Medicare Exchanges as Alternative to Group Retiree Health Coverage
"According to Kaiser Family Foundation data, just 23 percent of employers with over 200 employees offered retiree health benefits last year. But that statistic doesn't tell the whole story. Rather than exiting retiree benefits, a growing number of employers are looking to other avenues to provide benefits to retirees, including private Medicare exchanges." (OneExchange from Towers Watson)
[Guidance Overview] GASB 74/75: Calculation Specifics on Individual Entry Age Normal (PDF)
"The individual entry age cost method is specifically identified in the new standards as the only appropriate method for determining a plan's Total OPEB Liability (TOL) ... Entry age allocates the present value of benefits of a member over the active service of that member, from his or her 'entry age,' or date of membership, through his or her assumed age(s) of exit from active service.... There are also entry age variations related to how plan changes are reflected in the allocation process, and to whether allocation calculations are performed on an individual member basis or aggregated across groups of members. These variations may not comply with the specific individual entry age variation prescribed in GASB 74/75." (Milliman)
Pension/OPEB 2016 Assumption and Disclosure Study (PDF)
23 pages. "The 2015 median discount rate for pension plans in the study increased 30 basis points since 2014 but has decreased 195 basis points since 2007.... Median plan funding levels remained unchanged from 2014, with pension plan assets equal to approximately 82% of the projected benefit obligation (PBO) in 2015 and 2014 ... The 2015 median discount rate for OPEB plans in the study increased 35 basis points since 2014 but has decreased 200 basis points since 2007.... The percentage of funded OPEB plans in the study has remained constant since 2014 with 49% of plans being funded in 2015 compared with 50% being funded in 2014." (PricewaterhouseCoopers)
State OPEB Funding Has Improved
"States' other post-employment benefit (OPEB) liabilities decreased 10%, to $627 billion, between 2010 and 2013, after adjusting for inflation ... This drop resulted from lower rates of growth in health care costs and changes states made to their OPEB funding policies and retiree health plan provisions ... State-funded ratios increased from 5% in 2010 to 6% in 2013.... [T]he funded ratio of eight states decreased, and Oregon increased its funded ratio by 25 percentage points." (PLANSPONSOR)
State Retiree Health Plan Spending (PDF)
50 pages. "States' OPEB liabilities decreased 10 percent, to $627 billion, between 2010 and 2013, after adjusting for inflation.... States' actual expenditures for OPEB totaled $18.4 billion in 2013 ... If states had instead set aside the amount suggested by actuaries to pay for OPEB liabilities, their total payments that year would have more than doubled to $48 billion ... and spending to fully fund OPEB obligations would have outpaced what states contributed to active state employee health premiums." (The Pew Charitable Trusts)
Your Vanishing Health Coverage: Employers Are Cutting Retiree Health Benefits at a Rapid Rate
"[A]mong large firms that offer active workers health coverage, the percentage that also offer retiree health plans has shrunk to 23% in 2015 from 66% in 1988. The decline, which has been steady and almost unbroken, almost certainly reflects the rising cost of healthcare and employers' diminishing sense of responsibility for long-term workers in retirement." (Los Angeles Times)
District Court Rules Johnson Controls Retirees Not Entitled to Lifetime Health Benefits
"Applying the Third Circuit rule, the court then divided the CBAs into three groups. For the first group, the court held that the inclusion of the phrase 'shall have the following benefits . . . continued' did not unambiguously indicate that the benefits would vest past the expiration date of the applicable CBA. For the second group, the court held that the statement that health coverage would be continued 'until your death,' was not a promise to vest unalterable health benefits in light of the explicit durational clauses and other language in the CBAs indicating that the parties intended that the health benefits would terminate. Instead, 'until your death' indicated that the retirees were entitled to benefits during the term of the CBA but the benefits terminated if a retiree died before the CBA' s expiration. And, for the final group, there was a clear and unambiguous reservation of rights." [Grove v. Johnson Controls, Inc., No. 12-cv-2622 (M.D. Pa. Mar. 31, 2016)] (Proskauer's ERISA Practice Center)
[Guidance Overview] GASB's Updated Accounting Standards for Other Postemployment Benefits (OPEB) (PDF)
"This publication summarizes the key requirements in the updated statements, which are intended to provide a more comprehensive picture of the costs associated with st ate and local governments' OPEB benefits. It also notes some of the implications. As a result of the changes, which are generally very similar to the changes GASB proposed in Exposure Drafts published in 2014, sponsors of public sector plans will face significant additional work in order to prepare their financial statements." (Segal Consulting)
Employer-Paid Healthcare for U.S. Retirees Continues to Decline
"Two-thirds of employers provided retiree health coverage as recently as 1988 ... This was usually supplemental coverage to pay for prescription drugs, cap out-of-pocket expenses or to cover Medicare's deductibles and co-pays. By last year, that number had dwindled to just 23 percent. Among the employers that still cover retirees, a growing number are shifting retirees into insurance exchanges. Similar to a shift from a defined benefit to a defined contribution, the expense risk is shifted from employer to retiree." (The Fiscal Times)
[Opinion] Four Options for Saving Medicare from Collapsing under its Own Weight
"Raising premiums to ensure the standards of living for future generations is not eroded is not a bad idea. Forcing future taxpayers to bear the cost of today's retirees' vacation homes and RVs is not fair. Higher deductibles and co-pays is the gold standard that employers and commercial insurers have used for years. Reference pricing is a great idea and allowing some fully disclosed balanced billing would not offend me since doctors and hospitals would have to compete for seniors business. A risk adjusted credit to buy a private Medicare plan would also give seniors more options." (National Center for Policy Analysis Health Policy Blog)
California Gov. Brown's Long Road to Retiree Health Cost Relief
"The state paid $458 million in 2001 (0.6 percent of the general fund) for state worker retiree health care and is expected to pay $2 billion (1.7 percent of the general fund) next fiscal year -- up 80 percent in just the last decade.... The debt or 'unfunded liability' for retiree health care promised state workers has grown to $74.1 billion ... much larger than the unfunded liability reported by CalPERS for state worker pensions, $43.3 billion.... The state usually pays 100 percent of the health care insurance premium for retirees and 90 percent of the premium for dependents." (Calpensions)
Paying for Medicare Now and in the Future (PDF)
32 pages. "Though the [Medicare] program is progressive within generations, each generation's retirement benefits are paid in part by higher taxes on succeeding generations. Moving toward equalizing the tax burden across generations can be accomplished by constraining the tax financed portion of Medicare so that per capita spending grows at the same rate as per capita GDP. [The authors] outline four alternative ways to recast the program's financing and insurance structure so as to constrain the tax-financed portion of retiree health care spending." (Private Enterprise Research Center, Texas A&M University)

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