Retiree Health Benefits Causing Financial Strain on Employers

It’s no surprise that companies have struggled over the past few years to provide the level of benefit coverage they were offering their employees five years ago. One of the most expensive components of some organizations’ benefits plan is the offering of health coverage to retirees. The Benefits USA 2011/2012 survey results found 21.9 percent of companies offer supplemental retiree health coverage to retired employees. That’s just a slight dip from 22.9 percent reported in 2006. Employees are required to work an average of 12 years for their employer in order to qualify to receive this benefit upon retirement.

The offering of retiree health benefits varies widely by industry as 69.1 percent of companies in utilities offer them. Not-for-profit and banking and finance organizations offer retiree health benefits at a rate of 37.6 percent and 31.5 percent, respectively. Companies in healthcare offer the benefit at a rate of 15.8 percent, while hospitality employers offer it the least, 3.3 percent. On average, retirees are required to pay 65.1 percent of the premium for their retiree health benefits.

“Employers in the public sector and in other heavily unionized industries, such as utilities, have been feeling the financial pinch created by mandated retiree benefits for some time now,” said Amy Kaminski, director of marketing for Compdata Surveys, the nation’s leading compensation and benefits survey data provider. “Individuals should have a plan in place and not rely solely on their employers to provide health benefits upon retirement. Escalating medical coverage costs, combined with a rapidly increasing retiree population and longer life expectancies may make it difficult for companies to sustain these benefits indefinitely.”

One example of this is the United States Postal Service. The USPS has made headlines over the past year as economic woes have forced it to announce plans to close facilities, change delivery schedules and eliminate jobs. Many have noted that a large part of the trouble USPS is facing is due to a legislative requirement, mandating retiree health benefits be pre-funded for employees.

About the Survey
Benefits USA 2011/2012 analyzes national and regional data on benefits eligibility and administration policies with detailed information on benefit plans, premiums and provisions. Information was collected from nearly 4,500 benefit plans covering over six million employees across the country.

Compdata Surveys is the nation’s leading compensation and benefits survey data provider. Thousands of U.S. organizations provide data each year ensuring the reliability of our results. Compdata Surveys has been providing comprehensive data at affordable prices to organizations from coast to coast since 1988.  For further information about their compensation and benefits surveys, contact Michelle Willis at (800) 300-9570.

  • frank

    The Post Office retiree health plan is not paid by the postal service. Once an employee retirees his/her benifits come out of the office of personal management.
    These plans are paid for by active employees, not the USPS!

  • Scout

    Yeah Ron, I also regret that I too went to work for the USPS.Luckily you got out alive, I do hope you can enjoy your retirement.The USPS sucks for its employees and they are like working for the Nazis.Mamas don’t let your kids grow up to be postal workers, they suck the life right out of you.

  • kurt h

    it is not correct to use the usps as an example because they are being required,unlike any other buisiness,to pre-fund their FUTUER employeesforr 20 years from now,which how many others are required to do such?

  • kurt h

    thats FUTURE employees, ….kurt

  • Marilynn Reeves

    The frist 15 years I worked was great the last 18 is getting closer to hell every day. TOOOOOOOOOOOO many meaningless reports,scanning and just not enought help to get the job done right all thanks to management. Cuts should begin at the top not on the workroom floor. I know my job just let me do it. I have encouraged all my kids and grandkids to go into health care.

  • admin

    frank- You are totally wrong. The USPS pays every dollar of the employer portion of retiree health benefits- this IS NOT paid by OPM. And as everyone knows, the USPS pays a higher percentage of active employees’ health insurance premiums than the federal government does for its employees.