Taxation & Estate Planning

New Incentives to Retire Early - Government will offset Employers Paying Continued Health Care Costs

By Deirdre Wheatley-Liss

The Obama Administration reports today that they will subsidize employers who are providing medical benefits to "early retirees".  The issue is that Medicare kicks in at age 65.  Given the costs of private health insurance, older, and sometimes most highly compensated, employees are delaying their retirement because they can't afford to fully privately pay health care until age 65.  In order to incentivize these employees to retire early, a practice had been for an employer to continue medical coverage until age 65.  However, upward spiraling premiums have made this practice potentially uneconomic.  So here we are, employees can't afford to retire due to health care costs, and employers can't afford to offer retirement packages due to health care costs. 

The proposed solution is that is employers will now have an opportunity to be reimbursed for some of the health care premiums they add to retirement packages.  At its heart then, this is a job stimulus measure.  If older more experienced employees retire, it creates room for mid-level employees to move into new jobs (presumably at a lower salary) and frees up lower end opportunities for those out of work or moving into the workforce.

Effective next month, federal subsidies will allow employers to recoup a big chunk of the cost of medical claims for retirees ages 55 to 64 not yet eligible for Medicare, according to a White House official who spoke on condition of anonymity ahead of the official announcement expected Tuesday.

Full post as published by New Jersey Estate & Elder Planning Blog on May 04, 2010 (boomark / email).