retiree package

Nat

Just when many companies are looking to cut retiree benefits, we are going the opposite direction. Does anyone have document outlining retiree benefits that they could share with me? We are mainly considering this for health insurance and our carrier has said that we need a formal document outlining the parameters. Any help is appreciated.

Thanks
Nat

Theresa Gegen TX

I don't have any documents for you, but I do have some advice. Hire an expert in developing this type of material immediately. The law is very complicated, especially as regards heath insurance.

Here are some recent examples that I have had to review for clients, that may end up costing your company lots of money in the future:

1. If the company promises health insurance benefits for life after retirement, can the company later on stop giving benefits or change the benefits it gives? The answer may be that company, if its plans, election forms and written materials are not properly drafted, could be required to keep the same level of coverage for retirees for life. Right now, your company is growing, but later it may hit hard times or may have difficulty paying the rising cost of health insurance coverage, especially for elderly people (who are retired). Any and all written material must have a very clear and express disclaimer about the company's ability to modify, change or eliminate benefits.

2. Can the company cut off health insurance benefits for retirees over age 65, because they are covered by medicare anyway? Maybe, maybe not. Again, this is an extremely complicated area. Most insurance companies offer different coverage at different costs based on age. But under Title VII and the ADEA, if an employer buys a different policy for those over 65, it can be held liable for age discrimination. There are two tests the policy must pass (1) equal cost or (2) equal benefits. The tests are quite complicated.

In short, before you implement a program, I would have an expert review all documentation.

Good Luck!!

Margaret Morford

Also talk to your accountant about how this will have to be carried on the books and reserved for. FASB has a ruling that requires the estimated lifetime claims/value of this benefit be reserved for and carried as a liability of the company. Make sure your company is aware of this before it adds retiree medical. The big three auto makers have been trying to get out from under their past promises of retiree medical because of the FASB ruling.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]