Retiree benefits vest upon retirement and cannot be subsequent reduced by plan amendments. Even if insurers are no longer willing to insure retirees, the employer has a legal obligation to provide coverage.

Companies must recognize retiree benefits as a deferred compensation liability and accrue the cost during an employee's working years.

Calculating the liability for retiree benefits is complex because turnover, mortality, inflation and utilization need to be considered. The calculation is dramatically simplified by eliminating the inflation risk.

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