Retiree Health Benefits: Trends and Outlook
Employee Benefit Research Institute (EBRI)
EBRI Issue Brief, No. 236, August 2001
Financial Accounting Statement No. 106 (FAS 106), approved by the Financial Accounting Standards Board in 1990, required most private companies to significantly alter the way they accounted for their retiree health benefits beginning with fiscal years after Dec. 15, 1992. FAS 106 dramatically impacts a company's calculation of its profits and losses and thereby creates a strong incentive for financial managers to limit expenses.
As a result of FAS 106, and the increasing cost of providing retiree health benefits in general, many employers began a major overhaul of their retiree health benefit programs. Some employers placed caps on what they were willing to spend on retiree health benefits. Some added age and service requirements, while others moved to some type of "defined contribution" health benefit. Some completely dropped retiree health benefits for future retirees, while others dropped benefits for current retirees, although this happened less frequently than the other changes. Despite FAS 106, most 55-64-year-olds are covered by some form of health insurance. However, since 1994, the percentage of persons ages 55-64 without health insurance generally has been increasing.
While the changes employers have made to retiree health benefits do not appear to be having much impact on current retirees, they are likely to be felt most by future retirees who are not yet or may never become eligible for retiree health benefits because the courts have ruled that an employer has a right to terminate or amend retiree health benefits only if it has proved that such a right has been reserved or stated in specific language and on a widely known basis.
Another round of changes may take place in the near future, possibly further reducing or limiting the availability of retiree health benefits. Employers are likely to respond to the renewed surge in health benefit costs as well as recent court rulings regarding retiree health benefits and age discrimination and potential federal legislative initiatives that would make it more costly for employers to offer retiree health benefits. This paper documents these trends.
Number of Pages in PDF File: 28
Keywords: Employment-based benefits; FAS 106; Health care costs; Health care policy; Health insurance coverage; Retiree health benefits
JEL Classification: J32, M41, M44Accepted Paper Series
Date posted: September 12, 2001
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 2.265 seconds