Category Archives: Retirement

At a Crossroads: The Financing and Future of Health Benefits for State and Local Government Retirees

Source: Richard C. Kearney, Robert L. Clark, Jerrell D. Coggburn, Dennis M. Daley, Christina Robinson, Center for State and Local Government Excellence, July 2009

From the summary:
First systematic (entire workforce) assessment of OPEB (other post-employment benefits) liabilities of US states and a sample of localities.

Key findings of the report include:

* States have unfunded liabilities for retiree health care of about $558 billion.
* State plans differ substantially in their generosity, coverage, and outstanding liabilities.
* Unfunded actuarial accrued liabilities (UAAL) for many governments are large in absolute value and relative to total state expenditures, debt, and per capita income of the state. For others they are not.
* Actuarial statements reveal substantial differences in total unfunded retiree health care liabilities. This is a function of work force size, plan generosity, and the portion of health care costs paid by the employer.
* Most state and local governments, however, have adopted various cost containment, cost shedding, and cost sharing policies, including retiree premium contributions, higher deductibles, and higher co-payments. Some have curtailed benefits for future retirees.
* Preventive medicine and wellness programs are catching on in the states, but most to date are limited in scope.
* State and local governments report they are more willing to consider changes in age and/or years of service requirements for retiree health care eligibility.

Retirees at Risk: The Precarious Promise of Post-Employment Health Benefits

Source: Richard L. Kaplan, Nicholas J. Powers, Jordan Zucker, Yale Journal of Health Policy, Law, and Ethics, Vol. 9, No. 2, 2009

From the abstract:
This article examines the increasingly troubled state of employer-provided health benefits for retirees. The availability of such benefits is a major determinant of both the timing of retirement and the financial security of those who retire. Despite the signal importance of these benefits to current and prospective retirees, employers have been steadily eroding their value and in many cases, eliminating these benefits outright. Such actions are often catastrophic for the retirees affected, especially if they are not yet eligible for Medicare.

The Long Road to Retirement Recovery

Source: Ilana Boivie, National Institute on Retirement Security, June 29, 2009

The Federal Reserve released welcome data its June 2009 Flow of Funds report indicating that the economic situation may be stabilizing. Disposable personal income rose by $142 billion in the first quarter 2009 and by $358 billion since the first quarter of 2008.

But even so, the road to recovery will be a long one. Fed data also indicate that household net worth plummeted 16% in the last year. The massive financial losses will present significant challenges for retirees and near-retirees. Many will not have time to recover losses to their retirement savings accounts and housing values.

Cost Containment May Have a Price, But Is It a Crime? Analyzing the Basis for Criminalizing Managed Care Conduct

Source: Courtney Lyons Snyder, University of Pittsburgh Law Review, Vol. 70 no. 2, Winter 2008

A recent transplant case raises an interesting question: Should a managed care organization (“MCO”) face criminal prosecution when a patient dies after the MCO’s decision to deny payment for treatment? Is providing such a legal cause of action the solution, or does doing so just put money into the pockets of attorneys rather than into the hands of the injured health care consumer? As a recent case suggests, bad publicity could be as effective a deterrent as any criminal prosecution in changing an MCO’s behavior.

The public outcry from this case and the public bias against “greedy” insurers may be what is prompting the criminal liability threat. Managed care has become the new lead paint, tobacco, and gun manufacturer–it is a completely legal industry that is increasingly unpopular with the public. Unlike those industries, however, civil suits against MCOs face an additional hurdle: ERISA preemption. As a consequence, a plaintiff’s damages have been limited to reimbursement for expenses, which has been unsatisfactory for many, especially those who have lost loved ones due to treatment denial. Though criminal sanctions would not solve the remedies issue, it could provide the punitive and deterrent aspects for which there seems to have been so much public outcry.

This Note explores the logic behind healthcare insurers’ seemingly criminal exempt status, including situations when treatment delay and denial is almost certain to result in death for the insured, and why criminal prosecution is not the answer to the current healthcare debate. The events surrounding Nataline Sarkisyan’s death are outlined above for purposes of showing the sensitive nature of such cases and the strong public reaction against the insurer. This paper does not purport to determine whether criminal charges would be warranted in CIGNA’s case since many of the facts are in dispute. Part I will explore why a move toward criminal prosecutions seems almost inevitable in light of ERISA’s limitations on damages and the public
response to the healthcare crisis. Part II will look at why criminal homicide charges against a healthcare insurer seem unlikely to succeed, and Part III will examine why such prosecutions are not the solution to the current healthcare debate. Finally, Part IV will postulate why and how Congress should step in to fill ERISA’s gaping holes.

In-Home and Community-Based Long-term Care Costs in California

Source: UCLA Center for Health Policy Research, June 2009

From the press release:
In Los Angeles County, being disabled can cost a year’s income. That’s because the annual cost of in-home care services for seniors living alone is now $319 more than this group’s median income of $17,029.

Combine long-term care expenses with other basic expenses, such as food and rent, and a Los Angeles senior living alone will need twice the median income to survive, according to new data released today by the UCLA Center for Health Policy Research and the Insight Center for Community Economic Development.

Employers’ (Lack of) Response to the Retirement Income Challenge

Source: Steven A. Sass, Kelly Haverstick, and Jean-Pierre Aubry, Center for Retirement Research at Boston College, Issue in Brief, #9-13, June 2009

The brief’s key findings from a 2006 survey are:
– Employers expect many of their older workers will need to work longer, but are lukewarm about keeping them.
– Employers are failing to confront a potential disorderly retirement process.
– Firms more inclined to help workers plan for retirement or work longer tend to be large, fast-growing, and worried about “brain drain.”
– Firms that expect many older workers to stay on show no special interest in such retirement initiatives.
– In short, employers appear to view retirement initiatives only as part of hiring and retention, not as a way to ease retirement transitions.

Risk Pooling and the Market Crash: Lessons from Canada’s Pension Plan

Source: Ashby H.B. Monk and Steven A. Sass, Center for Retirement Research at Boston College, Issue in Brief, IB#9-12 , June 2009

The brief’s key findings are:

In the United States, workers hold equities in their 401(k)s, fully exposing them to a stock market crash.

Canada’s Pension Plan (CPP) offers an alternative approach – it pools equity risk, dampening the effects on individual households.

The CPP responds to a market crash by prompting policymakers to modestly adjust taxes and/or benefits.

With a very long-term horizon, the CPP can also respond to a market decline by buying assets at low prices, which helps stabilize the financial market.
This brief is available here.

The Goldless Years: How to Save the Nation’s Retirees from Bankruptcy

Source: Teresa Ghilarducci, New Labor Forum, Vol. 18 no. 2, Spring 2009
(subscription required)

From the abstract:
Seventy-five million working Americans, or about half the workforce, currently lack employer-based retirement plans. Tens of millions have recently faced crushing blows to their financial futures, as assets in individual-based, 401(k)-type pension plans fell by over 25 percent from September 2008 to February 2009 alone. Consequently, millions of the elderly are flooding the labor market during the worst employment crisis in 25 years, further exacerbating the unemployment numbers. Much of this unfortunate increase in joblessness is due to congressional policy preferences for commercial, individual retirement accounts (IRAs), like 401(k)s, that replace traditional pension plans. President Obama’s plan will worsen these problems. On February 26, 2009, in his budget submitted to Congress, Obama took a significant step by addressing the pension plan coverage problem, but he didn’t address the serious risks of the plans that he encourages. Thus Obama has moved in the wrong direction. He proposes a system of automatic workplace pensions to operate alongside Social Security that would force employers that don’t offer retirement plans to enroll employees in a “direct-deposit IRA account,” allowing workers themselves to opt out.

Obama’s plan might temporarily increase the IRA or 401(k) participation rate for low- and middle-income workers; but it does very little to solve the fatal flaws of a policy that depends on individuals managing their own private commercial accounts for their retirement. Obama’s plan does nothing to solve the problem of people not having a safe place to save for their retirement, nor does it insure an adequate savings rate, nor does it prevent withdrawals before retirement. People will still pay high retail fees for the financial products; individuals will still take out lump sums and risk not having enough money for the rest of their lives; and, worst of all, individuals will still face investment and market risk: not investing in the appropriate vehicles and possibly retiring when the financial markets are collapsing, like those who will in 2010. The individual account model is fatally flawed and should be replaced with a comprehensive and universal supplement to Social Security.

A Tidal Wave Postponed: The Economy and Public Sector Retirements

Source: Center for State and Local Government Excellence, May 2009

From the summary:
A Center survey finds that the economic slump is pushing public sector employees to delay retirement.

The Center for State and Local Government Excellence conducted a survey among 5,125 members of two groups of government managers: the International Public Management Association for Human Resources (IPMA-HR), and the National Association of State Personnel Executives (NASPE). About 460 members responded to the electronic membership questionnaire. Some questions elicited more responses than others.

This survey finds:
– The slumping economy is holding back retirements among state and local government employees.
– Almost half (49 percent) of the respondents to the survey said 20 percent or more of their workers are eligible to retire in the next five years.
– An overwhelming majority of respondents (80 percent) said the economy is affecting the timing of retirements.
– 85 percent said employees are delaying retirements.
– 9 percent said employees are accelerating their retirements to avoid changes that will reduce benefits.
– 7 percent said employees are taking incentives for early retirement.

Suggestions for the DOL, the Treasury, ERISA Plan Sponsors, Plan Administrators, and Representatives of Plan Participants or Potential Beneficiaries After Kennedy v. Plan Administrator of DuPont Savings and Investment Plan

Source: Albert Feuer, Law Offices of Albert Feuer, May 10, 2009

From the abstract:
In Kennedy v. DuPont Savings and Investment Plan (the “DuPont Plan”), 2009 U.S. LEXIS 869 (January 26, 2009) the Supreme Court appeared to proclaim a “bright-line rule” that plan documents determine ERISA plan distributions. However, the Court blurred the bright-line rules applicable to (1) benefit entitlements, (2) the alienation of pension benefits, (3) plan benefit distributions, and (4) qualified domestic relations orders. The basis for much of this blurring would vanish if the U. S. Department of Labor (“the DOL”), and the U. S. Treasury (“the Treasury”) affirmed their pre-Kennedy approach to many of these issues. Employee benefit practices may be improved if the DOL, the Treasury, plan sponsors, plan administrators, and representatives of plan participants and potential plan beneficiaries follow the suggestions set forth.
See also:
Feuer on the Kennedy Case – Source: Workplace Prof Blog, Law Professor Blogs, LLC, February 2, 2009
Feuer on the Supreme Court’s Approach to Death Benefits – Source: Workplace Prof Blog, Law Professor Blogs, LLC, February 8, 2009
Detailed Guidance on Kennedy v. DuPont – Source: Workplace Prof Blog, Law Professor Blogs, LLC, February 20, 2009