Significant Reductions in Corporate Retiree Health Liabilities Projected If Medicare Eligibility Age Lowered to 60

GAO discussed company-sponsored retiree health benefits. GAO noted that: (1) about 9 million private-sector employees rely on employer-provided health benefits; (2) a new Financial Accounting Standards Board accounting rule will burden companies by compelling them to acknowledge substantial unfunded retiree health liabilities; (3) the proposed change in liability would also provide considerable financial relief to companies by substantially reducing their pay-as-you-go costs (PAYG), accrued liabilities, and prefunding costs for retiree health benefits; (4) companies and industries with many retirees under age 65, older workforces, and industries with benefit packages would likely experience the greatest reductions in costs and liabilities; (5) the change in liability entails a substantial expansion of Medicare program costs, which would be borne in part by all employers and their employees through higher taxes; (6) companies' 1991 PAYG costs of $11.4 billion would have decreased 35 percent if the age of Medicare eligibility had been lowered to 60 and companies' accrued retiree health benefits would have dropped about 30 percent; (7) if companies were to prefund retiree health benefits, they would make annual contributions for benefits accrued during the year and for the amortization of any existing unfunded accrued liabilities; and (8) companies' 1991 prefunding costs would have dropped about 17 percent if the age of Medicare eligibility had been lowered to 60.