Feds Want To Help Older Workers Work

“As a result, pay-as-you-go funding is the predominant funding method for retiree health benefits,” Paganelli said.

One result at employers with skimpy retiree health benefits is that employees who shift to part-time work before they qualify for Medicare also face the threat of losing access to employer-sponsored health benefits.

For members of qualified retirement plans, the problem is that the plans are barred from dispensing benefits until an employee has ceased to work for the employer or reached the normal retirement age, Paganelli said.

“One of the most significant barriers to formal broad-based phased retirement arrangements is the prohibition against pension distributions to actively working employees who have not attained normal retirement age,” she said. “The foundation of the restriction is the regulatory definition of a pension plan as providing for the payment of benefits ‘after retirement.’ This requirement has resulted in a restriction against pension plans distributing benefits to participants prior to severance of employment or attainment of normal retirement age.”

The Internal Revenue Service has proposed new rules to allow for some flexibility for phased retirement programs, but these proposals “would impose significant administrative burdens and limited flexibility such that very few employers have expressed interest in providing such a benefit to older workers,” Paganelli said.

The Special Committee on Aging has posted written versions of Paganelli’s testimony, Bovbjerg’s testimony and other statements made at the hearing on the Web at http://aging.senate.gov/public/index.cfm?Fuseaction=Hearings.Detail&HearingID=63