At Work

Shortsighted – HumbleDollar

Do employers take a short-sighted view that hurts workers … and their business? Click on the link below for my post on this topic.

Freeze pensions, raise deductibles to catastrophic levels, eliminate retiree medical benefits, cut the 401(k) match. Corporate executives make such decisions, often relying on consultants, but they don’t think long-term or have a broader strategy.

Source: Shortsighted – HumbleDollar

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2 replies »

  1. As BenefitJack states well, retirement promises without funding are mere dreams. Thousands of retirees of General Motors who were non-union had their corporate aided medical insurance coverage eliminated following GM’s restructuring following bankruptcy. Their union cousins retained theirs, in a political negotiation with Obama Inc.

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  2. Like Mr. Quinn, I was a corporate benefits weenie at Fortune 500 firms for over 30 years.

    Retirement promises without funding are mere dreams.

    At every firm I joined, I inherited responsibility for retiree medical promises that my predecessors and prior leadership teams made – but failed to fund. So, in my last corporate position, back in the 1980’s, without any prompting, I analyzed our unfunded retiree medical liability ($1.5+B), and recommended we retain retiree medical coverage but assert our ability to prospectively change the coverage. I also proposed funding those commitments through a retiree medical account incorporated in our pension plan.

    In the 1990’s, when the accounting rules changed, the portion of the liability that had yet to be funded showed up on the corporate balance sheet. Additional analysis prompted additional prospective changes – including confirming to leaders and workers alike that, after a 25 year transition period, employer provided retiree medical coverage would be linked to and limited by funding in that retiree medical account.

    However, at that point, I already had 15+ years of corporate benefits experience, and, it was a certainty that coverage would have to continue to change and evolve – if only to adjust for inflation.

    Today, active employees at that same firm still pay contributions for single medical coverage that are a smaller percentage of take home pay (on average, and averages can be deceiving) than they paid when I arrived there in 1985. And, while most employees only have access to Health Savings Account capable health options, the lowest deductible, $1,350 for single coverage, is still a smaller percentage of actual health care costs than the $200 deductible that was in place in 1985.

    If $1,350 seems high to you, consider that the Medicare Part A deductible is $1,340. Yes, when they say M4A, they are not talking about Medicare as many know it – a “high deductible health plan”.

    Of all people, President Trump’s current budget proposal offers a couple of solutions to the issues Dick mentions (insulin, etc.). They would allow a plan with a “Bronze” level of coverage (not necessarily a high deductible) to qualify for Health Savings Account contributions, and they would allow for the creation of Health Savings Account capable coverage for Medicare beneficiaries.

    Bottom line, failure to fund Social Security, Medicare, multiemployer pensions, single employer pensions, retiree medical, etc. ensure that the next leadership group will be required to reconsider past, unfunded promises.

    There are three ways to reduce balance sheet liabilities – cut benefits, fund the promise, or a combination of the two. Retirement benefit negotiations must include funding decisions. That is particularly true for union negotiated pensions and retiree medical – which qualify for better tax-preferences than retirement promises to non-represented employees.

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