Now that employers are getting comfortable with strategies for extinguishing their long-term pension commitments to employees, they are focused on offloading other retirement obligations.
Chief among those are the costs of retirees’ health care.
That’s what Aon Hewitt found when it surveyed 548 companies about their plans for managing retiree health coverage costs.
“We saw tremendous pension settlement activity during 2012, and that trend is continuing in 2013. Companies looking to shrink benefit liabilities on their balance sheet may explore the viability of settling their retiree health care obligations as well,” said Milind Desai, retirement actuary at Aon Hewitt. “At present, there are a number of tax, legal and market hurdles that limit the feasibility of settling retiree medical program commitments in a cost-effective manner, but this may change in the future.”
As employers found with pension obligations, where there’s a will, there’s a way. And the Patient Protection and Affordable Care Act may represent the solution they have been seeking, says Aon.
In response to rising health care costs and the requirements of the PPACA, Aon reports, “many U.S. organizations have or are seriously considering sourcing post-65 retiree health care benefit coverage through the individual Medicare plan market. … More than 60 percent of employers are reassessing their long-term retiree health strategies due to the PPACA.”