Study: Retirement Good for One's Physical and Mental Fatigue

According to a study published in the British Medical Journal, while retirement does not change the risk of major chronic diseases, it is associated with a substantial reduction in mental and physical fatigue and depressive symptoms, particularly among people with chronic diseases. In "Effect of retirement on major chronic conditions and fatigue: French GAZEL occupational cohort study", the authors, led by Dr. Hugo Westerlund from Stockholm University, followed a large occupational cohort in France and looked at respiratory disease, diabetes, coronary heart disease and stroke, mental fatigue, and physical fatigue, measured annually by self report over a 15-year observation period.

Several explanations of these findings are possible. If work is tiring for many older workers, the decrease in fatigue could simply reflect removal of the source of the problem. Also, without the demands of work, participants may feel less concerned about limited energy, leading to lower ratings of fatigue. Furthermore, retirement may allow people more time to engage in stimulating and restorative activities, such as physical exercise.

The authors note, however, that participants in the study retired at 55 or close to that age, due to generous retirement provisions in France and from their employer, so that their findings may not apply to settings in which people retire later.

Writing an editorial "Is early retirement good for your health?" in the same issue of the BMJ, Alex Burdorf, PhD, Erasmus Medical Center in Rotterdam, the Netherlands, echoed these concerns and stated that "[r]esearch is needed to corroborate these findings in other countries with a substantially higher age of retirement."

Source: British Medical Journal Abstract (November 24, 2010)

Recession Impairing Ability of State and Local Governments To Adjust Retireee Health Liabilities

The Center for State and Local Government Excellence has released an issue brief finding that the U.S. economy has slowed the ability of local governments to address long-term funding of their retiree health care obligations. "How Local Governments are Addressing Retiree Health Care Funding" looks at 206 jurisdictions that were had reported in 2009 that they were likely to adopt a long-term strategy to strengthen their retiree health care funding.

According to the new brief, while the economy, insufficient revenues, and competing budget priorities have posed significant impediment to their plans, many jurisdictions are making sweeping changes in their retiree health care plans. Specifically, the brief reports that:

• 36% of the jurisdictions have increased or plan to increase the years of service required to vest.
• 11% have increased the retirement age.
• 39% have eliminated or plan to eliminate retiree health benefits for new hires.

Source: Center for State and Local Government Excellence News Release (August 5, 2010)

Survey: Employers Look for More Changes in Retiree Medical Benefits

The International Society of Certified Employee Benefit Specialists has released a survey about providing medical benefits for pre-65 and post-65 retirees that finds that employers are struggling to balance conflicting objectives in responding to organizational cost pressures, rapidly rising retiree contributions, administrative challenges, and the transition of older workers into retirement. "In the absence of a panacea, employers are examining ways in which current market offerings can be designed and deployed to help 'change the deal' with employees and retirees without undermining workforce management initiatives or inciting undue employee or retiree unrest."

Conducted with Towers Perrin, the survey--"Employers Are Poised To Take Action On Retiree Medical Plans"--reports that while the long-term trend toward employer exit is clear, with only 39% of employers offering retiree medical to new hires, over 70% of respondents still offer retiree medical to current retirees and some portion of their current active population. While only 7% of employers have ceased financial support for pre-65 coverage in the past two years, 42% have either changed or plan to change the cost-sharing deal between company and retiree. For post-65 retirees, 60% have capped their subsidy report plan costs in excess of the cap, almost 40% have or will recast cost-sharing terms with post-65 retirees, and almost 20% have ceased--or plan to cease--providing any post-65 financial support at all.

Source: International Society of Certified Employee Benefit Specialists Press Release (December 18, 2008)

EEOC Rules that ADEA Is No Barrier to Employers Coordinating Health Plans with Medicare

The U.S. Equal Employment Opportunity Commission (EEOC) has published a final rule allowing employers that provide retiree health benefits to continue the longstanding practice of coordinating those benefits with Medicare (or comparable state health benefits) without violating the Age Discrimination in Employment Act (ADEA).

Following a period of litigation arising from a 2000 federal circuit court decision that the ADEA requires that the health insurance benefits received by Medicare-eligible retirees be the same, or cost the employer the same, as the health insurance benefits received by younger retirees, the regulation now provides an exemption for ADEA coverage for the common and longstanding employer practice of "coordinating" those benefits with Medicare by supplementing the government healthcare or by offering retirees a "bridge" benefit to cover health expenses after employees retire until they become Medicare-eligible.

“Implementation of this rule is welcome news for America’s retirees, whether young or old,” said Commission Chair Naomi C. Earp. “By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits which are increasingly less available and less generous. Millions of retirees rely on their former employer to provide health benefits, and this rule will help employers continue to voluntarily provide and maintain these critically important benefits in accordance with the law.”

Source: Equal Employment Opportunity Commission Press Release (December 26, 2007)

Other Sources: Des Moines Register "Don't make it harder to give health benefits to retirees" (January 2, 2008); AARP News Release (December 27, 2007)

Canadian Surveys Show that Attention to Health Policies Can Keep Older Workers on the Job

Derek Sankey, writing for CanWest News Service, picks up on two recent surveys to point out that "tweaking health-care benefit plans could help retain experienced workers for longer, yet most companies plan to reduce those benefits in coming years."

The first survey--the "The sanofi-aventis Healthcare Survey 2007"--reports that about two-thirds of workers aged 55 or older are "very likely" or "somewhat likely" to continue working or return to the workforce after retirement if their employers would offer health benefits that continue into retirement. However, the second survey--conducted by Hewitt Associates--shows taht 57% of organizations plan to reduce post-retirement health-care benefits over the next three years.

However, according to Cathy Course, a senior benefits consultant for Hewitt Associates in Calgary, emerging trends in health-care benefit plans would suggest taht there are ways to combat the increasing costs associated with such a large of number of workers exiting the workforce and wanting extended health benefits, with flexibility being a core concept.

Source: Saskatoon Star Phoenix "Health benefits worker-retention issue" (August 18, 2007)

Corporate Retiree Health Benefits Continue To Be Scaled Back

Sylvester J. Schieber, director of U.S. benefits consulting at Watson Wyatt Worldwide, writes that the combination of rising health care costs and Medicare coverage means that retiree benefits, as we know them, are disappearing.

As Medicare begins to cover prescription drugs in 2006, the biggest gap in medical benefits for most retirees will be filled. For those 65 and older, coverage from their former employer may no longer be necessary. The large-scale trend away from employer-provided retiree medical benefits not only will continue; it's likely to accelerate.

While the bottom line is that U.S. companies that finance retiree medical benefits are at a competitive disadvantage compared to other companies in their industry that do not offer the benefits so that, over the long term, the inability to compete on costs may inevitably threaten the viability of any company that provides rich retiree health benefits, there is still a need for insurance coverage by those who retire before age 65. "Our challenge is to develop alternate approaches for workers to accumulate assets to cover their insurance and out-of-pocket health costs during retirement, but to do so in affordable and sustainable ways that allow U.S. companies to compete and continue to serve the needs of future retirees."

Source: "Retiree medical benefits-past, present and future" Employee Benefit News (March 2006)

County Governments To Be Hard Hit by Aging Workforce

Two articles speak to the financial dilemmas facing county governments in the comng years as their workforces age. In Ocean City Today, Christine Cullen writes that while unfunded retirement benefits ended years ago for private employers, only now is the Governmental Accounting Standards Board requiring local governments to fund post-retirement insurance costs during the tenure of the employee. Thus, governments will have to set aside millions of dollars in segregated funds to cover the liability. Thus, for example, while Ocean City, Maryland, paid approximately $200,000 in retiree health benefits in 2003, and in 2005 the county paid close to $2 million, when the new system is in place, the city will pay $2 million annually, while the county would have to come up with $14 million, or nearly eight times the current amount.

Simiilarly, Bill Turque writes in The Washington Post about the job losses governments are facing. "Montgomery County estimates that 50% of its senior managers will be eligible for retirement by 2010. By next year, more than 70% of Fairfax's top officials will be able to leave and collect benefits." His story points out differences fro for public sector managers. For example, while private corporations have long used "succession planning" as a tool to groom executive talent, civil service regulations place sharp restrictions on designating heirs apparent. In addition, not only is the post-baby boom workforce smaller, but it also tends to hold government service in lower esteem than those who came of age in the 1960s and 1970s.

Source: "Health benefit costs could hit hard for governments" Ocean City Today (February 24, 2006)

Source: "Graying of Workforce Troubles County Governments"The Washington Post (February 26, 2006)

Community College Uses Bond Issue To Secure Retiree Benefits

Writing for the Hayward, California The Daily Review, Michelle Maitre reports that Oakland's Peralta Community College District is the first in the nation to float a bond issue to cover the ever-increasing cost of retiree health benefits. "Like many districts, Peralta had promised to pay retiree health benefits for life," but funded those benefits on a "pay-as-you-go" basis. However, an aging workforce and rising health care costs are increasingly making that plan untenable.

The bond money has been placed in an irrevocable trust that can be used for only two purposes: paying retiree medical benefits and retiring the bond debt. Peralta Chief Financial Officer Thomas Smith anticipates a 6% annual return over the 45-year term of the bond, enough to finance retiree health benefits and enable the district to repay its debt.

Source: "Peralta innovates funding of benefits" The Daily Review (February 20, 2006)

Retiree Health Coverage Is a Sweetener Fewer Companies Are Willing To Offer.

In an article on retiree health benefits in CFO Human Capital, the first special issue of CFO Magazine dedicated to the topics of human capital management and employee benefits.discusses, Alan Nyberg concludes that "[c]onsidering the current lack of choices for maintaining retiree medical benefits, the real message may be that employers are doing their level best to live up to promises made to workers." According to Nyberg, an increasing number of corporations—-8 percent in 2004—-are eliminating retiree health benefits for new hires or current employees; ina addition, with respect to current retirees, 79 percent of companies in 2004 raised the portion of the premium they expect retirees to pay and 13% shifted the full cost of premiums onto retirees. However, he also reports on a couple bright spots. One, is the increasing viability of voluntary employee benefit associations (VEBAs) for employers with the means to prefund their obligations. The other is a newfound interest in health reimbursement arrangements for retirees, which allow employers to credit a discrete amount of money toward retiree medical benefits to individual employees over any length of time.

Source: "Promises, Promises" CFO Magazine (February 22, 2005)