"Rev. Proc. 2026-3 says specifically that IRS will no longer issue PLRs on Section 420 transfers to a Section 401(h) retiree health account. However, the revenue procedure doesn't say IRS won't issue rulings on Section 420 transfers to a life insurance account. It's unclear whether IRS intended to limit its no-rule decision to transfers to a 401(h) account, and if so, what the agency's reason for doing so might be.... Instead of pursuing a Section 420 transfer, some employers might consider terminating their overfunded DB plans to take advantage of advantageous annuity pricing." MORE >>
"With the changes to the Medicare Part D cost sharing structure behind us, the future impact of the IRA was expected to result in savings. This may still be true, but it's not as simple as applying the negotiated savings to affected market share and assuming the rest of the market won't be impacted.... [T]he net impact on the total OPEB liability will likely still be small, with higher short-term costs, and it may take a few extra years for plan sponsors to see a meaningful reduction in Rx costs due to the drug price negotiations." MORE >>
"[T]he Fourth Circuit affirmed a district court’s rulings largely in favor of CONSOL Energy after the company terminated retiree welfare benefits, holding that the employer did not violate ERISA by ending benefits where plan documents clearly reserved the right to amend or terminate the plan." [Fitzwater v. Consol Energy, Inc., No. 24-2088 (4th Cir. Mar. 3, 2026)] MORE >>
"A notable change in the proposed revision includes expanding the scope to acknowledge that the performance of actuarial services for retiree group benefit programs may require actuaries from more than one practice area, in which case, all references to actuary collectively apply to collaborating actuaries, and to clarify the application of the standard when the actuary selects an output smoothing method and when an assumption or method is not selected by the actuary." MORE >>
"An OPEB experience study is a comprehensive review of your plan's historical data to evaluate and refine the assumptions that drive actuarial valuations. By analyzing actual participant behavior and economic trends, plan sponsors can ensure that their assumptions align with current realities and future expectations -- leading to more reliable financial disclosures and, if applicable, funding strategies." MORE >>
"The Connecticut Supreme Court reversed a lower court and held that the Town of Groton is not required to extend employer health savings account (HSA) contributions to retired police officers.... [R]etirees argued that a 2008 pension agreement promising the 'nature and scope of coverages, including but not limited to deductibles' in effect for active officers entitled them to the same HSA contributions the town provides to active officers under a later collective bargaining agreement." [Duso v. Groton, No. SC 21082 (Conn. Dec. 9, 2025)] MORE >>
42 pages. "[T]his practice note addresses the cost components that underlie MA plans, how such components can be combined with certain assumptions to model future MA plan costs, and where to find the data to make regular updates to an MA cost projection model. One particular goal is to provide actuaries with tools to project costs for an MA plan that currently has a zero-dollar premium." MORE >>
"An employer requested a PLR that a 401(h) account can pay for the medical benefits of retirees whose pension benefits have been annuitized in a 'lift out' under the employer's two pension plans. The PLR concludes that the payment of medical benefits from the 401(h) accounts for annuitized retirees does not violate Code section 401(h) or the Code section 401(h) regulations or otherwise jeopardize the tax-qualified status of the pension plans under Code section 401(a)."MORE >>
"Federal annuitants often don't have the same flexibility as federal employees when it comes to offsetting their health insurance costs, making it important to keep certain strategies in mind when weighing Open Season enrollment. Federal annuitants face two significant premium increases next year: [1] FEHB premiums will rise by an average of 12.3% for the enrollee share. [2] Medicare Part B premiums will increase by 9.67%." MORE >>
"This case will limit ADA claims by retirees against their former employers, but ... Justice Gorsuch opined ... that retired employees may be able to proceed with ADA claims if they can plead and prove that they were disabled and a 'qualified individual' under the ADA when their employer adopted a discriminatory retirement benefits policy, even if they later happen to be retired when they bring suit." [Stanley v. City of Sanford, FL, No. 23-997 (S. Ct. Jun. 20, 2025)] MORE >>
"Recent analysis highlights that a man will need to have saved $191,000, and a woman will need to have saved $226,000 just to have a 90% chance of meeting their healthcare spending needs in retirement. As medical costs continue to rise faster than inflation and life expectancy is higher than ever, planning for healthcare in retirement ... should be viewed as a 'core liability' alongside housing, food, and other necessities." MORE >>
"Employers typically finance OPEB obligations through either: [1] a Pay-As-You-Go (PayGo) approach; or [2] prefunding through a dedicated trust. In this article, we will compare these two approaches by highlighting their advantages and drawbacks, and comparing their financial impact through a practical case study. This article is intended to increase awareness in the advantages of prefunding OPEB benefits, while also balancing current budget priorities with long-term fiscal sustainability." MORE >>
"The IRS National Office recently released a legal memorandum ... relating to pre-funding post-retirement medical benefits in a welfare benefit fund.... [T]he memorandum holds that funding an allowable post-retirement medical reserve may NOT take into account periods of coverage before an actual severance from employment.... The position in this legal memo is not particularly surprising given the language of the statute. But, it potentially reflects a more restrictive position than the IRS has previously followed in rulings describing allowable funding policies for Code section 401(h) post-retirement medical benefit funding." MORE >>
"Plan A provides that a covered employee will be eligible to receive medical benefits upon attainment of a specified age, which Plan A refers to as the employee's 'retirement age'. These medical benefits are available upon attainment of that age without regard to severance from employment with Company X.... The section 419A(c)(2) addition to a reserve for post-retirement medical benefits does not include amounts for benefits expected to be provided with respect to an employee prior to the employee's severance from employment with the employer maintaining the plan. Moreover, the addition to the reserve does not include amounts funded more rapidly than on a level basis over the covered employees' working lives. Thus, Company X's contributions to the welfare benefit fund are not deductible under section 419A(c)(2) to the extent they include such amounts." MORE >>
"Unfunded retiree health care debt is becoming an unsustainable financial burden for state and local governments, as the price tag for Other Post-Employment Benefits (OPEB) grows larger with medical inflation, while assets set aside to pre-fund these obligations remain low.... [A recent analysis] found that states and large municipalities collectively reported $789 billion in unfunded OPEB liabilities, exceeding the $753 billion in unfunded pension liabilities, as of 2022." MORE >>
"Rising retiree healthcare liabilities strain public sector budgets, but shifting to the individual marketplace with defined contributions offers cost relief and better retiree healthcare." MORE >>
"[D]elivering retiree healthcare benefits through the individual market presents a significant opportunity for institutions to reduce costs and improve retiree satisfaction. However, it's imperative to allocate sufficient resources to a communication and change management strategy that anticipates and addresses retiree and stakeholder concerns" MORE >>
"Fidelity Investments' Retiree Health Care Cost Estimate finds that an average 65-year-old couple today will spend upwards of $172,500 on healthcare costs in retirement, representing a 4% increase compared to last year in an overall rising trajectory since Fidelity's inaugural $80,000 estimate in 2002.... [J]ust 23% of Americans are contributing to an HSA to prepare for healthcare costs in retirement, and only three-in-10 are investing their HSA assets." MORE >>
"SCOTUS ruled that retirees who do not hold or seek employment at the time of the alleged discrimination are not protected under Title I of the ADA. The decision does not necessarily preclude all claims from retirees or all claims about retirement benefits. An ADA plaintiff must plead and prove that at the time of the alleged discrimination, they held or desired a job and could perform its essential functions with or without reasonable accommodation." [Stanley v. City of Sanford, FL, No. 23-997 (S. Ct. Jun. 20, 2025)] MORE >>
"The Supreme Court ruled that a retired firefighter with Parkinson's disease could not bring claims under the ADA regarding changes to her post-employment health benefits.... The decision clarifies a circuit split by concluding that to have standing under the ADA, plaintiffs must hold or desire a job for which they can perform essential functions, thereby narrowing protections for retired employees." [Stanley v. City of Sanford, FL, No. 23-997 (S. Ct. Jun. 20, 2025)] MORE >>
"[T]he Strengthening Benefit Plans Act of 2025 ... would allow for overfunded 401(h) retiree pension accounts to be transferred to help pay for active healthcare programs. A 401(h) plan is an employer-sponsored fund for post-retirement medical benefits. By funding these benefits with previously paid contributions, employers would avoid paying additional costs out of pocket." MORE >>
"Organizations considering VEBA asset reallocations should incorporate long-term strategies, emphasizing regular fiduciary training, continual monitoring of regulatory guidance, and periodic internal compliance reviews. Establishing clear governance structures, including dedicated oversight committees and independent fiduciary advisors, can further bolster compliance and fiduciary prudence. Moreover, proactive participant engagement and transparent communication about any reallocation decisions foster goodwill and reduce potential litigation risks, supporting broader organizational objectives and stability." MORE >>
"[1] ERISA reporting and disclosure requirements; [2] COBRA coverage continuation requirements; [3] HIPAA privacy and security rules; [4] [ACA] information reporting by health coverage providers." MORE >>
"Because certain Pension Plan participants will be eligible to receive retirement benefits prior to their separation from employment once they attain age 59½, separation from employment would not be a condition to receiving retirement benefits under the Pension Plan for those participants. Accordingly, the participants covered by the proposed plan amendment who are at least 59½ and still actively employed would not be excluded from being considered eligible to receive retirement benefits under the third sentence of Section 1.401-14(b)(1)."MORE >>
"[O]nly 24% of employers currently provide subsidized health coverage in retirement.... [T]he average healthy 65-year-old can expect to spend up to $281,000 (male) or $320,000 (female) on healthcare costs in retirement, which translates to $188,000 (or $207,000 for a female) needed in savings today. ... [T]his paper offers a number of effective methods to save for healthcare costs not covered by federal programs such as Medicare. It also provides options for employers that support these strategies." MORE >>
