Other post retirement benefits (OPRBs) are benefits, other than
pension distributions, paid to employees during their retirement
years. These benefits may include life insurance, tuition
reimbursement or medical plans. (Kagan, 2020) I am choosing to
focus on health insurance as a postretirement benefit option. Health
insurance can be costly to a business because of the age of the retiree
they could have more health claims. If a retiree has Medicare,
Medicare would pay first and then the post retirement health
insurance would pick up a portion of the remainder expense.
OPRBs are similar to pensions because they are an accrued liability
for the company recognized on the balance sheet. These benefits are
earned by accrual of time the employee works for the company.
There are three major differences between healthcare OPRBs and
pensions. (Wahlen, 2017) One is the beneficiary of a pension plan is
the retired employee while an OPRB could include a spouse or
dependents. Another difference is the benefit paid to the employee.
A pension is a fixed dollar amount paid monthly, but a health plan is
not limited and the amount paid varies depending on the illness. A
third difference is that pensions are company funded because the
contributions are tax-deductible. OPRBs are not funded because
while the payments for the services are tax-deductible, the
contributions into the plan are not. One other important fact to note,
is unless specifically stipulated in a contract the company has the
right to withdraw OPRB benefits.
Out of the choices above I think it makes the most sense to offer
health insurance as an OPRB. This would be a huge benefit to
someone retiring since that is a large cost and it may make that
company more appealing to work for. On a side note, as in the case of
my mother who was only 50 when she worked for Master Lock
already had her pension fully earned for retirement, but they were
looking for the older, higher paid employees to "retire early" Her
benefit that she chose at that time was tuition reimbursement, she
went back back to college for Dental Assistant and was able to work
another 14 years until retirement age and collect full benefits of
pension and has Medicare.
Kagan, J. (2020). What Are Other Post-Retirement Benefits?
Investopedia. Retrieved May 25, 2022 from:
https://www.investopedia.com/terms/o/otherbenefits.asp
Wahlen, Jones, Pagach. (2017) Intermediate Accounting. 19-5a
Conceptual Overview of Other Postretirement Benefits.
