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Opinions and views from expert CFOZone members.

Tag >> retiree healthcare
Jan 03
2011

Employers warming up to Obama Care

Posted by Stephen Taub in retirement benefitsretiree healthcarehealth-care reformhealth carecomplianceCash

Stephen Taub

Despite threats from incoming Republicans to overturn President Obama's healthcare reform, a majority of companies are seemingly embracing the changes. However, they clearly are concerned about the associated costs.

More than half (53 percent) of all employers--and 67 percent of large employers--say they do not plan to drop health benefits, according to a recent national employer survey conducted by the Midwest Business Group on Health (MBGH) and co-sponsored by the National Business Coalition on Health, (NBCH), Business Insurance and Workforce Management.

Nov 12
2010

How to slash costs at the US Postal Service

Posted by Stephen Taub in US Postal Serviceretiree healthcarerestructuringcost cuttingCash

Stephen Taub

If a company determined it would lose $8.5 billion in the current year, more than it had previously expected, due to lower volume of business, what would it do?

Close plants or warehouses, fire employees and orchestrate a major restructuring.

Jul 29
2010

How a CFO brings government into 21st century

Posted by Jeremy Smerd in retirement benefitsretiree healthcarepensionshealth carebenefits

Jeremy Smerd

If you live or work in New York City you know how the subway can be both a blessing (when it runs on time) and a curse (when it doesn't) or for reasons that on Wednesday became clear: fare hikes.

If you don't live in New York you can appreciate why the agency responsible for public transit, the Metropolitan Transportation Authority, is having such a difficult time making ends meet. At the top of the list is compensation and benefits costs, which account for two-thirds of the MTA's $12 billion operating budget for 2011.

The MTA says its health care costs are going up about 9 percent annually-which is actually in line with national increases. The challenge for a public agency of course is that it is locked into
contracts with its heavily unionized workforce. Making changes is not easy.

The plan the MTA put forward Wednesday was to enter in what it called "net zero" contracts with its unions-contracts in which any raise would be "paid" for by givebacks in productivity, changes in work rules or increased contributions to health care benefits. The unions took exception to this proposal but no one doubts that the compensation structure of government employees needs to come in-line with their private sector counterparts. Andrew Cuomo, the Democratic nominee for governor, has made reforming this imbalance part of his
platform.

Debt service aside (and the MTA's debt service totals $1.8 billion this year, growing to $2.5 billion by 2014), the MTA, like so many government entities throughout the country, has long term health care challenges ahead. Its health care retirement obligation totals $1.4 billion growing to $1.7 billion by 2014. While the MTA continues to pay enough into its retiree health care fund to pay for its current retirees' health care, the authority, citing this year's cash-flow problems, will not pay $57 million this year into a fund for future obligations.

The Great Recession has helped bring the issue of government post-retirement obligations to light. As government revenues shrink and obligations grow, taxpayers sense an inherent injustice between their own grim retirement prospects and the assurances given to public sector workers. Subway service cuts and fare hikes are only meaningful if they address the long-term problems rather than enable government to deal with short term crisis.

Cuomo is banking on this public displeasure, as is the MTA. Next year the MTA's contract with its largest union is up for renewal. The transit authority will be able to test whether it has public support for changing the way the state entity does business with unions. Bringing government into the 21st century by reducing health care and other post-retirement obligations will be good for taxpayers and for businesses, including those with heavily unionized workforces.

 

Jul 14
2010

Appeals court saves retiree health care costs

Posted by Stephen Taub in Riskretiree healthcarehealth careCourt of Appealsbankruptcy

Stephen Taub

A critical appeals court ruling on Tuesday could have a widespread impact on bankrupt companies that try to dump their commitment to provide retiree health care benefits as part of their reorganization plan.

On June 25, the US Bankruptcy Court for the District of Delaware approved the adequacy of the disclosure statement in connection with Visteon's reorganization plan, which included plans to cut health care benefits to 2,100 retirees, according to Dow Jones.

Jul 06
2010

They're from the government and ...

Posted by Jeremy Smerd in retiree healthcarehealth care reformbenefits

Jeremy Smerd

The federal government is now accepting applications from employers
that want to get reimbursed for medical claims paid on behalf of early
retirees.

The $5 billion Early Retiree Reinsurance Program, enacted as part of health reform, will repay employers for 80 percent of medical claims between $15,000 and $90,000 made on behalf of retirees who are 55 years and older but not yet eligible for Medicare.

May 25
2010

Retiree health plans in cross-hairs

Posted by Stephen Taub in Towers Watsonretirement benefitsretiree healthcareheatlh carehealth-care reformhealth insuranceCash

Stephen Taub

As more and more companies look to save money on heath care costs, a large number of them are targeting their former employees.

According to a recent survey conducted by Towers Watson, a stunning 77 percent said they believe health care reform will reduce the number of large employers offering employer-sponsored retiree health benefits.

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