Value of "Retiree Health" benefits?

Value of "Retiree Health" benefits?
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#22

I’d say you could value it based on today’s prices for similar coverage, but after you discount it for the time value of $$$ and some X factor of your likelihood of actually vesting in it, it’s probably not worth as much as you think. You sort of need a crystal ball…

The other thing is your age upon retirement. Under 65, it’s a valuable ppo plan that could be worth 10k+ annually in today’s dollars. Over 65, it’s a relatively cheap Medicare gap policy…


#23

Questions that you’ll want to figure out for your situation:

  1. Typically the pension plan provides a set percentage of the premium charged by the PPO plans in retirement: Can you find out what this percentage is?

  2. Does 10 years of service really get you health benefits? Or is it 10 years at age 65, more years (25-40 typically) to get benefits before age 65?

  3. What is the funding percentage of the system that pays out the benefit? What level of legal protection does it enjoy in your state?


#24

So, Cal, do you mean the benefit is worth $2000/mo or the rate for retiree is $2000/mo?

I only learned today from someone that we have retirement health “benefit” which in our case means we can buy it at company group rate. For Bluecross that’s over $2k/mo and for Keiser that’s about $1200/mo. Which is still a heck a lot cheaper than buying it on the open market. The eligibility is work for 5 years and over 55.


#25

I have this benefit at the energy company I work for. It didn’t have much value to me when I started at 24 but now at 48 I see what an incredible deal it is for my spouse and I. I think I will qualify for it after I turn 50 with 70 points towards my 80 point pension (Points = Age + Years of Service).


#26

The benefit is worth $2000 a month. See, for instance, LACERS (City of Los Angeles) which offers 25-year retirees over $1,800 a month in dental and medical subsidy. It’s shown on the retirement plan balance sheet as OPEB (Other Post Employment Benefits) and is rarely ever funded close to what the regular pension system is. https://www.lacers.org/aboutlacers/publications-forms/publications/retired/open-enrollment-guides-brochures/2018%20Health%20Benefits%20Guide.pdf

Some agencies make you retire immediately to claim the subsidy; if you don’t take the retirement payout (maybe you are going to the private sector or want to wait a few years to spike the percentage if you feel you have a long life expectancy) then you get zero. The State of California is that way - work 20 years and get free coverage for life and that of your family BUT you have to retire, and you can’t do so until 50. If you work 20 years for the state, go to another state or the private sector, and retire from there, you get nothing towards retiree health care. https://www.calpers.ca.gov/docs/forms-publications/state-health-guide.pdf

Quirks like these are why many people argue pensions are unsustainable. If someone retirees at 50 but prior to doing so marries someone half their age, that person could inherit a pension and retiree health care for their life. Let’s say the happy couple has a few kids, and they are covered until 26. Conceivably 25 years of public service could lead to 45 years of family coverage being paid out. This is in addition to the known loophole in some plans that don’t prorate based on spouse age but pay out a survivor allowance to the spouse regardless of age. In the era before same sex marriage it was not uncommon for a lesbian or gay person to “marry” a close friend’s child prior to retirement, to transmit a lifetime of benefits to them and their children.


#27

retiree health care benefits are not pensions

Pensions and retiree health care benefits are regulated and ran very differently

Further the pensions and benefits of government entities are regulated way differently than private.


#28

Hmm … that sounds like the genesis of a pickup line. Of course, it probably wouldn’t work on anyone under 35 or 40. :slight_smile: