Retirees may be in for an unpleasant surprise if they don't have a backup plan for health insurance
Workers with ongoing retiree healthcare benefits might feel like they’ve got a golden ticket, but they should prepare a backup plan — those benefits are not guaranteed.
Employer-offered retiree healthcare benefits, unlike programs such as the 401, are often not protected. There’s no federal law that requires employers to keep these benefits intact, the Department of Labor said, unless the employer has specifically promised to maintain the program. This is applicable to both private and public plans.
Take for example New York City’s healthcare benefits for its 250,000 retired city workers. The city is currently trying to to change its retiree healthcare benefits by moving retirees from their traditional Medicare plans to a Medicare Advantage plan. If the change is approved, retirees would have to pay $191 per month to keep their current coverage. A judge recently blocked the change, at least temporarily, in favor of retirees’ complaints.
Healthcare benefits can be actual insurance coverage offered below market rates, or a stipend for medical expenses, but they’re not guaranteed, said Brian Schmehil, managing director of wealth management at The Mather Group. “Employers have no legal obligation to maintain these benefits,” he said. “When they get pulled from a retiree, it can come as a shock.
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