RMAs Being Considered By Large Employers

November 18, 2002 (PLANSPONSOR.com) - Large employers may be looking at Retiree Medical Accounts (RMA) as an alternative to traditional retiree medical benefits, according to a recent Watson Wyatt & Company survey.

RMAs – which allow an employer to contribute a fixed dollar amount to an account, used by the retiree to purchase health care – are currently only being utilized by 2% of the 56 large employers surveyed by Watson Wyatt.   However, 7% may be adopting RMAs for future retirees and 13% have them for new hires.  Employer contribution amounts range from $750 to $2500 per year, with annual interest rates of 5.0% to 7.7%.

Most plans concentrate benefits on older, more tenured workers by putting in place minimum age and service requirements. 

The report notes that RMAs may be especially attractive to employers that have eliminated retiree medical coverage or have never offered a retiree medical benefit and are looking to attract top mid-career talent.

“Many companies are concerned that they will have difficulties hiring and retaining certain skilled and professional mid-career employees because they do not offer retiree medical coverage. That problem will only grow worse as the workforce ages and the trend away from employer-provided retiree medical plans continues”, said Joe Martingale, national health care strategy leader at Watson Wyatt.