Even with the utmost diligence and careful preparation, plans for retirement can go awry. With a number of post-retirement risks to consider, it’s important to know how to navigate them. In this blog, we’ll discuss how traditional retiree health benefits work, some common retiree health care liabilities, and how group Medicare Supplement plans can reduce retiree healthcare costs. Read on to learn more.
How Do Traditional Retiree Health Benefits Work?
Traditional retiree health benefits are an important source of coverage for those looking to start their days on the golf course instead of at the office. Traditional retiree health benefits are given at the start of retirement through an employer, and may include life insurance, medical insurance, or deferred-compensation arrangements.1
Traditional retiree health benefits are usually mostly employer-paid, with retired employees contributing to costs through co-payments and deductibles.1 Retirement benefits come in an array of forms, and may be provided through local and federal government agencies, and private and public companies. Ultimately, retiree health benefits can come from a variety of sources and in a variety of sizes.1However, like everything, there are some common risks involved. To better understand them, you’ll need to learn about retiree health care liabilities, and how they appear in the public and private sector.
What Are Retiree Health Care Liabilities?
Retirement healthcare liabilities are the cost of benefits. In other words, retirement healthcare liabilities are determined by the difference between the total amount due to the retiree and the total amount of money the company has to make those payments out to them. When it comes to retiree healthcare liabilities, any degree of miscalculation could be tragic. Let’s take a look at how these liabilities work within the public and private sector.
PrivateOver the past 25 to 30 years, retirement plans offered by employers in the private sector have changed from a more traditional defined-benefit plan (pension) to the more modern defined-contribution plan.2 The shift comes due to the difficulty in estimating what an employee’s projected benefit obligation would be under a pension plan, and the liabilities of a pension plan being very large.2 That is to say, since companies who use a pension plan for paying retired employees have to provide a specified payment amount in retirement, an amount they may not have, they may have more difficulty paying for a pension than those who use a defined-contribution plan.3 A defined-contribution plan helps lower the amount of liability by allowing employees and employers to contribute and invest funds into retirement over time.3 So, a defined-contribution plan actually has the ability to protect retirees better than a pension plan would allow.
PublicUnlike the private sector, which has more flexibility, public sector retiree benefits are more archaic. That is to say, many areas of the public sector are “falling short of what they need to fully fund retirement benefit obligations.”4 A main reason for this is the continued use of pensions. In fact, since 2000, states have seen unfunded pension liabilities grow to more than $1 trillion, with an additional $700 billion in unfunded retiree health benefit costs.4 Since the gap has widened, tax payers have been footing the bill. However, despite the doubling of taxpayer contributions to retiree health benefits, the public sector is still coming up shy of their obligations on a massive scale.4
Regardless of whether you work in the private or public sector, retiree healthcare liabilities pose a very real threat to the retired employees seeking their payout.
How Group Medicare Supplement Plans Can Reduce Retiree Healthcare Cost Liabilities
Maybe increasing healthcare cost liabilities for retirees has you nervous. Thankfully, there is a way to reduce retiree healthcare cost liabilities – all you need is a Group Medicare Supplement plan. Generally, a Group Medicare Supplement plan is offered by an employer during your time of employment. In most cases, Medicare will pay the first part of your health care bills, and your group health plan will pay any leftover costs.5
The advantage of a Group Medicare Supplement plan is that it can be used with retiree health benefits offered by your employer. And since employers aren’t required to provide retiree coverage, and can even cancel coverage or change benefits, having the added security of a Group Medicare Supplement plan can help limit any liabilities a retiree health plan provides.5
In closing, no matter whether you’re in the public or private sector, retiree healthcare liabilities can pose a very real threat to the quality of life and coverage you receive in your retirement. By enrolling in a Medicare Supplement plan, you can help reduce future retiree healthcare benefit costs by securing coverage for the future.
- Investopeida, Other Post-Retirement Benefits, 2019
- Investopedia, The Rise, Fall, and Complexities of the Defined Benefit Plan, 2020
- PEW, Legal Protections for State Pension and Retiree Health Benefits, 2019
- Medicare.gov, Retiree insurance, 2020
Categories: Group Retiree Supplemental Health, Insurance, Medicare Supplement