Retiree Health Benefits Continue Their Slow Decline

By SHRM Online staff Jan 16, 2012

Among U.S. employers, 21.9 percent offered supplemental retiree health coverage to retired employees in 2011—a slight dip from 22.9 percent reported in 2006, according to Compdata Surveys' Benefits USA 2011/2012 report.

On average, employees were required to work 12 years for their employer to qualify to receive supplemental health benefits at retirement, and to pay 65.1 percent of the premium for this benefit.

The survey, conducted in the latter part of 2011,analyzed national and regional data on benefits eligibility and administration policies from nearly 4,500 benefit plans covering over 6 million employees across the U.S.

Variation Among Industries

The offering of retiree health benefits varied widely by industry, the survey found. Retiree health benefits were provided by:

69.1 percent of utility companies.

37.6 percent of not-for-profit organizations.

31.5 percent of banking and finance firms.

15.8 percent of health care organizations.

Hospitality employers offered it the least, at just 3.3 percent.

Financial Strains Felt

“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, a 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,” she noted.

According to Kaminksi, one example of this is the U.S. Postal Service (USPS), which made headlines in 2011 when it announced plans to close facilities, change delivery schedules and eliminate jobs. Many analysts contend that a large part of the financial trouble the USPS is facing is attributable to legislative mandates that retiree health benefits be pre-funded for employees, she pointed out.​

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