Health Care Reform Could Prompt Earlier Retirement

July 13, 2012 ( - Provisions of the Patient Protection and Affordable Care Act (PPACA) could cause employees to retire earlier because of health care coverage available after leaving their companies.

Many employees have accumulated enough wealth to stop working but do not have adequate health care savings for retirement, Brad Kimler, executive vice president of benefits counseling at Fidelity, said during a Fidelity webinar hosted by PLANSPONSOR.

The legislation could particularly benefit employees ages 55 to 64 who may be contemplating retirement but are not yet eligible for Medicare, Mike Thompson, principal of human resource services at PwC, told PLANSPONSOR. In addition, this age group may have previously had trouble finding coverage because of pre-existing conditions, he said.

With health care coverage made easier, employers may need to provide alternative incentives—such as phased retirement—to keep their staff, said Arthur Noonan, senior retirement consultant at Mercer. Companies may not want employees to retire earlier if knowledgeable staff will be lost, he said.

On the other hand, some employers may be delighted about the PPACA because it gives employees more confidence that they can afford health care during retirement, Noonan said. It also could save companies money if the reform prompts them to stop offering retiree medical benefits. Companies providing retiree medical could still provide employees with an allowance but direct them to the exchanges, he said.

“In general, employers are still trying to figure out how to afford health care,” Thompson said. “This could provide an easier way to save.”