Today’s retirees face massive health care costs. Research from Fidelity found that a 65-year-old couple retiring now can expect to spend an average of $280,000 on health care costs. At a time when many people’s retirement savings are falling short, this news may come as a rude awakening.
At the same time, the labor market is tight. Talented employees have their choice of positions, and they’re looking at more than pay. A Glassdoor survey found that 63 percent of employees and job seekers rate benefits as a top factor when looking at job ads.
Put two and two together, and the answer is clear. Employers need to provide benefits to compete in the talent war. Employees are worried about retirement and health care costs, so offering retiree health benefits is a logical option.
But are employers doing this? A look at the Kaiser Family Foundation’s Employer Health Benefits 2018 Annual Survey shows the current state of retiree health benefits.
The Survey’s Findings
To assess the current state of retiree health benefits, the KFF survey looked at employers with 200 employees or more. The larger a firm is, the more likely it is to offer retiree health benefits; 41 percent of companies with more than 5,000 employees offered the benefit, while only 15 percent of companies with between 200 and 999 workers did.
Having union workers or being in certain industries also increased the odds that retiree health benefits would be offered. State and local government employers were the most likely to offer the benefit, with 68 percent doing so, while 42 percent of transportation/communications utilities companies and 35 percent of finance companies did so. On the other end of the spectrum, only 4 percent of wholesale companies offered retiree health benefits.
Among companies that do offer retiree health benefits, 91 percent make the benefits available to early retirees who are under age 65 and not eligible for Medicare. Only 67 percent offer retiree health benefits to retirees who are 65 or older, while 60 percent offer benefits to both age groups.
One way to offer health benefits to Medicare-eligible retirees is by contracting with a Medicare Advantage plan. Most firms that offer benefits to retirees over age 65 take this approach, with 74 percent doing so.
Overall, only 18 percent of large firms offered retiree health benefits. This is much lower than it has been in recent years. In 1988, 66 percent of large firms offered retiree health benefits.
Over the last three decades, fewer and fewer companies have been offering retiree health benefits. At the same time, retirement health care costs have increased, and many people are struggling to save for their golden years. Offering retiree health benefits is away to address the problem while standing out among employers competing for talent.