PwC Shares Insights on Post-Retirement Benefits

November 9, 2011 ( – Martin Hill, Director at PwC-New York shared insights on post-retirement benefit considerations in response to the 2010 health care legislation, during a PwC Webcast. 
According to Hill, there are a number of factors that have impacted retiree medical benefits. These factors include:

•  Benefit mandates
•  Dependent coverage for individuals in school up to age 26
•  The Early Retiree Reinsurance Program
•  Medicare Advantage funding reform
•  Excise tax on “cadillac” plans
•  Means test on Part D/revisions to Part B means test
•  Taxation changes regarding Medicare Retiree Drug Subsidy (RDS)
•  Closing of Part D donut hole

Hill stated the changes to Part D and Subsidy have had the biggest impact on retiree medical.

He also touched on the VEBA strategy, and noted that sponsors can still make a tax deduction for retiree drug benefit payments prefunded in a VEBA prior to 2013. Other changes to note are that VEBA funds must be earmarked for post-65 retiree drug payments for full accounting benefits. Also, strategy can be implemented with funds from 401(h) accounts as well.

Employers who consider the VEBA Strategy should also make note that they may be exposed to future legislative risks. Also, they may not be able to prefund enough to preserve all lost deductions.