In my opinion, firms are most likely to give permanent life insurance
as a post-retirement perk because it is the most cost-effective
solution. From the company's point of view, a one-time payment for
life insurance is probably the cheapest of the three options. Since
contributions to other post-retirement benefits (OPRBs) don't get the
same tax breaks as pensions, companies will want to offer the option
that will cost them the least. Health insurance, on the other hand,
would make more sense for businesses to offer, as it is often a much
more appealing offer to potential employees than life insurance.
Health insurance is costly, and companies that provide outstanding
healthcare will be preferred over those that do not provide health
insurance at all. Especially for retirees who may be living on a limited
income, knowing that any medical bills that come up will be covered
gives them peace of mind and relieves some of the stress that comes
with being retired.
In general, accounting for post-retirement benefits is comparable to
accounting for pensions in that both deal with liabilities. There are,
however, a few major distinctions. For example, the retired employee
is normally the beneficiary of a pension plan, although the person's
spouse and dependents up to a specific age can also be the
beneficiary of health insurance. Another difference between
pensions and OPRBs is the benefits. Pension benefits are usually a set
monthly sum paid to the retired employee. However, when it comes
to health insurance, there is rarely a specific sum that is paid out.
Rather, regardless of the severity or duration of the disease,
payments are provided as they are used. Finally, the two differ in
terms of funding. Companies must finance pension plans as a result of
ERISA rules, and contributions to those programs are tax-deductible.
OPRBs, on the other hand, are exempt from similar legislative
obligations, and donations to the plans are not tax-deductible.
References
Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2017).
Intermediate
Accounting: Reporting and
analysis
(2nd ed.). Boston, MA: Cengage Learning.
