Retiree Health:

Company-Sponsored Plans Facing Increased Costs and Liabilities

T-HRD-91-25: Published: May 6, 1991. Publicly Released: May 6, 1991.

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GAO discussed the increasing costs and liabilities for company-sponsored retiree health coverage. GAO noted that: (1) about one-third of all private-sector workers received retiree health coverage; (2) about 9 million retirees were in company-sponsored health plans, and 39 percent of them were under 65 and not yet eligible for Medicare; (3) the cost of providing retiree health benefits varied considerably among employers, due in part to differences in the average age of retirees; (4) some companies were concerned that disclosing such liabilities as retiree health benefit costs could adversely affect their financial position by lowering their stock prices or reducing their ability to obtain capital financing; (5) the nation's private employers accrued liabilities of $296 billion for retiree health benefits in 1991; (6) prefunding of retiree health liabilities would stabilize companies' annual expenditures and provide added security for workers, but would be very costly; (7) the tax code offers several options which could be used to fund retiree health benefits, but each option limited the amount of prefunding; (8) since 1984, some companies have terminated their retiree health benefits, but others have changed health plan provisions to shift some costs to retirees or reduce benefits; and (9) retirees have limited protection from company actions to reduce or terminate benefits, and retiree health benefits laws do not prevent benefit terminations in all cases.

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