Employee Benefits: Companies' Retiree Health Liabilities Large, Even With Medicare Catastrophic Insurance Savings

GAO discussed U.S. companies' liabilities for their retiree health plans. GAO noted that many companies: (1) are rethinking their commitment to providing retiree health benefits, due to rapid increases in health benefits costs and financial reporting proposals; (2) could benefit from alteration of tax laws to encourage advance funding of retiree health benefits and set-aside of assets needed to cover future debts; (3) will realize some savings, since provisions of a recently enacted law overlapped some aspects of many retiree health benefits plans; (4) believed that they had a right to modify or terminate employee and retiree health benefits and had explicit language reserving that right; and (5) changed their health plans between 1984 and 1988 through such actions as adding cost-containment measures, increasing deductibles and coinsurance amounts, and raising coverage costs. GAO believes that, to better secure future retiree health benefits, Congress will need to strike the proper balance among promoting access to affordable retiree health care, supporting honest financial reporting, and addressing the federal deficit.