Retiree Health - Property & Casualty Insurer - 1993-2008
An insurance company with 150 staff wanted to extend the medical and dental benefits to their 50 retirees. The benefit supplier already provided life insurance without any age limitation and was willing to extend the health benefits with minor modifications. The challenge was calculating the un-funded liability that would need to be disclosed in the financial statements of the US parent.
The employer introduced a health spending account for retirees with a $100 monthly contribution level for the first year with periodic increases.
The retirees appreciated the ability to make spending decisions without being questioned. Claims for medical supplies and equipment are approved based on the sales receipt and the prescription when required by the Income Tax Act. Claims for prescription drugs are paid as long as a pharmacist has dispensed them.
The employer appreciated cost stability, annual refunds equivalent to 2-months of contributions and easier compliance with accounting reporting requirements.
The eventual shutdown of Canadian operations was facilitated by clear communication of their obligation with regard to retiree benefits.