Retirees and baby boomers throughout the nation are wondering with great trepidation, what would happen to them if their health care coverage were simply taken away?
Many fear that the current economic crisis in America will speed up that process. It has already occurred with retirees of some of America’s largest corporations, and municipalities are threatening to follow suit. According to Paul Miller, executive director of the national retiree advocacy group, ProtectSeniors.Org, the situation is as dire as the bailout was for the auto industry, Wall Street and America’s major banks.
“There are currently an estimated 18.5 million American retirees and baby boomers in the United States with health benefits being significantly threatened,” Miller says. “If cancelled by the corporations they once worked for, most would be dumped into the federal and state healthcare systems. In effect, this means their former employers would be getting an additional back-door federal bailout at the expense of the taxpayer.”
The health care coverage Miller is referring to is earned retiree benefits that tens of millions of Americans earned and paid for during their working years. He says that for whatever reason, many corporations never actually set that money aside and are using the current financial turmoil to threaten the cancellation and further reduction of these benefits.
Much of his organization’s hope is placed on a bipartisan legislative proposal– titled the Emergency Retiree Health Benefits Protection Act in the 110th Congress — which gained the support of 88 bipartisan co-sponsors. The bill would prohibit employers from making post-retirement cancellations or reductions of health benefits that retirees had earned.
“Companies would be made to live up to the financial commitments made to their employees and retirees, and most importantly, would do so without placing mandates on the employers as to what health plans they provide or monetary ceilings on the amount of health benefits”, Miller says.
Behind its efforts, ProtectSeniors.org has harnessed the support of retirees from 285 companies, 36 unions, 76 municipal, state and federal retiree groups, in addition to 14 retiree associations.
“Lately, economists, talk show hosts, journalists and even politicians have been blaming America’s retirees and union workers for the economic downturn, calling our earned retirement health coverage legacy costs and burdensome,” says C. William Jones, a retiree from Verizon Communications and president of the 100,000-member Association of BellTel Retirees. “I, and tens of millions of retirees like me, worked decades to earn those benefits, taking less pay and forgoing days off to fund them. For companies to now imply that retirees are a liability to them and America is morally offensive and absolutely inaccurate.”
Advocates of the legislation argue that over many years, companies used the promise of post-employment health care coverage to induce employees to stay with that employer or, in some cases, to take early retirement. Companies did not agree to pay retiree benefits out of the goodness of their hearts or social well-being; there were significant financial benefits and tax breaks for them. They further explain that employers benefited financially by not having to pay Social Security and payroll taxes on these benefits.
“Funding these benefits could be deferred by companies in years when earnings were low, unlike payroll that must be paid on time,” Jones says. “Since pensions are based on a percentage of wages, companies also saved on long-term pension costs.”
University Of Alabama School Of Law Professor Dr. Norman Stein, an expert on the nation’s Employee Retirement Income Security Act (ERISA) pension law testified in favor of the proposal at a congressional hearing in the fall, saying Congress should pass legislation “that would make it difficult or perhaps impossible for an employer to terminate retiree health benefits after an employee has retired.” The long time advisor to AARP and the Pension Rights Center argued, “Congress could try to level the playing field for employees with clear, reasonable and consistent rules.”
Just last year the U.S. Supreme Court and ‘Equal Employment Opportunity Commission ruled that it is legal for companies to reduce or eliminate earned health benefits for retirees ages 65 and over, due to a loophole in the ERISA pension laws.
Acting to close that loophole with legislation to protect America’s retirees, Rep. John Tierney (D-Mass.) says, “Unlike pension plans, ERISA does not impose mandatory ‘vesting’ requirements with respect to health benefits. Consequently, many courts have upheld that there is no legal protection for employees. (The Emergency Retiree Health Benefits Protection Act) remedies this and ensures that the reasonable health benefit expectations of retirees from ERISA-sponsored regulated group health plans are fulfilled.”
“America’s retirees are not here asking for a handout or a bailout,” Miller says. “We merely want companies to live up to the promises they made. Give us the health benefits we earned and paid for over decades of loyal service.”