Erisa and Other Post Employment Benefits (Opeb)

Kaiser Family Foundation Health Care Reform - Erisa and Other Post Employment Benefits (Opeb)

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Health assurance for retirees and their dependents, life insurance, dental insurance, and long term disability or care coverage are representative benefits typically included in an Opeb program. Even though employment has ended, the Opeb sponsoring club has a contractual compulsion to deliver the promised benefits to eligible former employees and/ or their family members.

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Kaiser Family Foundation Health Care Reform

Why are Other Post Employment Benefits Important?

Companies and government agencies that wish to attract and withhold great employees find that a blended recompense box of current and future benefits helps them verbalize a skilled labor force.

Employees place a high value on future benefits that will enable them to create a financially fetch life style in their resignation years. The perceived value of these non-pension benefits can be so great, in fact, that many employees (particularly in the government) are willing to accept a lower current recompense box in replacement for the promise of future benefits.

Now that the cost of health care coverage and other promised benefits has become so expensive, however, plan sponsors are looking it difficult to adequately fund their obligations. As a result, many plans are underfunded.

Erisa and Other Post Employment Benefits

"Retiree medical" and connected benefits are not insured by Pension benefit Guaranty Corporation (Pbgc), nor is pre-funding of these obligations required by any regulatory agency. Opeb benefits are in most cases unfunded "pay as you go" liabilities of the sponsoring employer, although some employers, particularly unionized employers, pre-fund some Opeb liability straight through a Veba (voluntary employees benefit association) trust.

The employee resignation wage safety Act of 1974 (Erisa) limits beneficiaries' legal ownership to need that Opeb sponsors meet their contractual obligations. Compensatory and punitive damages suits are prohibited, for example. If a enterprise files for bankruptcy, Opeb contracts become subject to bankruptcy court proceedings and may or may not be modified.

Changes to Other Post Employment Benefits Agreements

U.S. health care costs surpassed .3 trillion in 2008, more than three times the 4 billion spent in 1990, agreeing to the Kaiser family Foundation. As life expectancy increases along with the cost of medical care, plan sponsors are looking for ways to safe their lowest line.

Common Opeb cost reduction efforts consist of expanding retiree cost sharing, restricting benefit eligibility, capping the each year cost of retiree health care expenditures, or revision designate drug benefits. Unlike pensions, Opeb benefits do not vest. The overview plan descriptions and official plan documents will consist of a reservation of ownership clause. This language gives the boss the right to amend or discontinue the plan, even for those already retired and receiving benefits.

Whether or not proposed Opeb modifications are consistent with plan documents, litigation is always a possibility when it comes to benefit reductions. This was the case in the matter Rexam, Inc. V. United Steel Workers of America. The union sued over changes made to Rexam's retiree medical plan. One of the Steel Workers' assertions was that the communal bargaining agreements trumped the reservation of ownership language in the plan.

How do entities catalogue for Other Post Employment Benefits?

The Financial Accounting Standards Board (Fasb) issued Fasb Staff Position (Fsp) Fas 132(R)-1on December 30, 2008. Titled "Employers Disclosures about Postretirement benefit Plan Assets," this guidance document requires sponsors of defined benefit pension plans and other postretirement benefit plans (Opebs) to disclose more information about invested assets. The ruling is efficient for fiscal years ending after December 15, 2009.

Other post employment benefits promised by municipalities and governmental agencies are governed by Government Accounting Standards Board (Gasb) pronouncements 43 and 45 issued in 2003 for first implementation in December 2006. These guidelines need government agencies to reason and description the actuarial value of their other post-employment benefits (Opeb) liability.

Future Outlook for Other Post Employment Benefits

For the past 20 years the nationwide trend has been to reduce or eliminate Opeb. Given the current aggregate of poor economic conditions, contentious pressures, and the uncertainty caused by national healthcare reform, this trend is likely to continue.

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