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Health plans - retiree coverage

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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)] (Roberts Bartolic)
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])
Retirees of Automotive Manufacturer Established Entitlement to Lifetime Health Benefits
"A collective bargaining agreement and plant closing agreement provided retirees of an automotive parts manufacturer and their spouses with healthcare insurance benefits that survived the expiration of a collective bargaining agreement, ruled a divided Sixth Circuit.... [The court] found that during the long bargaining history between the employer and union, the parties came to rely on prior judicial decisions interpreting language included in decades of CBAs. " [UAW v. Kelsey-Hayes Co., No. 15-2285 (6th Cir. Apr. 20, 2017)] (Wolters Kluwer Law & Business)
Post-Tackett Cases Provide Guidance for Determining Vested Status of Retiree Medical Benefits
"Recent rulings from the Fourth and Sixth Circuits address the vesting status of medical benefits provided to retirees and their spouses and dependents under various collective bargaining agreements (CBAs).... The outcome in each case turns on the language of the applicable CBA and other facts and circumstances, but certain rules of contract interpretation emerge: [1] Unambiguous contract language controls.... [2] Silence may create ambiguity.... [3] Ambiguity allows for extrinsic evidence.... [4] Reasonable modifications to vested benefits may be permitted." (Thomson Reuters / EBIA)
Deal Reached to Fund Health Benefits for Retired Miners
"Days before 22,000 retired miners and their dependents are scheduled to start losing health benefits, members of the U.S. Senate and House of Representatives have agreed on a funding source that would continue health coverage. 'This is a permanent fix, it isn't another kick-the-can-down-the-road temporary fix,' said U.S. Sen. Joe Manchin, D-W.Va.... Past funding plans had relied on using untapped money from Abandoned Mine Lands funds to pay for pensions and health coverage. But Manchin said lawmakers from Wyoming were against that plan. Instead, customs fees charged on goods entering the country will be used to fund health benefits[.]" (The State Journal)
Why Would Congress Bail Out Miners' Pensions?
"If legislators don't act by the end of April, miners will lose their health-care benefits. They may soon lose their retirement benefits, too.... The miners argue that Congress has an obligation to step in because of a deal signed between the federal government and the United Mine Workers in 1946 to end a nationwide strike.... But Congress is in a tight spot. If it bails out the miners, why stop there? Why not bail out all of the other pension funds, private and public, that are on the brink of insolvency?" (The Atlantic)
Trio of Retiree Health Benefit Decisions Delivered by 6th Circuit
"All three cases involve collective bargaining agreements with the United Auto Workers. In each ruling, the court closely examined the language of the parties' CBAs to determine whether retiree health benefits were intended to vest for a retiree's lifetime ... the Sixth Circuit's new trio of opinions suggests that the proper inquiry is very fact-specific and will depend largely on the language of the relevant bargaining agreements. The opinions also suggest that Sixth Circuit judges may not [all] be on the same page in interpreting post-Tackett rulings[.]" (Bloomberg BNA)
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 (PDF)
"[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 (PDF)
"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])

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