Retiree Medical Benefits, also called post-retirement health insurance, are employee sponsored benefit plans for workers who get retired at age or 55 or above.
How ERISA is applied to Retiree Medical Benefits?
ERISA governs all plans that are sponsored by employer or union other than public employee union, government employer or nonprofit employer. ERISA governs rights reservation provision in SPD or through more official documented plan that allows sponsor to terminate or edit all the parts. All changes must be implemented or communicated under ERISA guidelines.
Any beneficiary of ERISA plan must have a copy of SPD or summary plan description that outlines all the benefits. This copy is compulsorily provided by sponsor when an employee is eligible to participate in plan, or when required by beneficiary or participant or whenever new plan takes effect. If a beneficiary loses his/her copy, they can request for a copy again. A third party administrator or an in-house customer support should also help beneficiary to understand the benefits he/she is entitled to.
Risks with Retiree Medical Benefits
It adheres to an unfunded financial liability that is indicated in sponsor’s financial reports. If any economic pressure is faced by company today, many employers tend to eliminate or reduce such costly obligations and beneficiaries not yet eligible can find coverage through private health insurance. As healthcare cost increases, these benefits become increasingly costly to replace.
Participants don’t read or completely understand these documentation and come to know only when benefit is withdrawn and when a very little can be done. However, the union plans are operated in different terms, and do not typically represent retirees. Many cases are reported where unexpected changes for such plans and their related medical benefits are resulted in severe lawsuits such as reservations of right language and intersection of various bargaining agreements or a lawsuit when any insurance agents are reclassified as independent and in this process their firm pension or post-retirement medical benefits. Another example of this is that when beneficiaries that questioned for their retiree medical benefits under ERISA must speak with their sponsor to understand more about the particular benefits that are available to them. They should have a contingency plan to bridge their medical benefits in case they are thinking to take early retirements.
A plan sponsors or their third party consulting firm like Goldleaf ERISA Consulting should consistently and clearly communicate both the benefits offered to the existing employees and retired individuals and the potential time period for those benefits.