2021 Retiree Health Cost Estimates
We present our latest numbers on how much healthcare will cost retirees going forward.
The Pension Protection Act of 2006 (PPA) has raised the requirements for funding pension plans and increased mandatory communication to plan participants. Unfortunately, these new rules coincided with the steep decline in asset values of 2008-2009.
A Midwest multiemployer pension plan trust faced an all-too-typical situation—the plan's funding status plummeted due to the 2008 market drop. While it is clear that some plan changes will be required to turn the funding situation around, the trustees did not want their constituents to panic—the fund was in a good position to honor its existing obligations and over the longer term to get back to full funding. And, participant acceptance of upcoming changes will be important.
The annual funding notice was due out at the end of April but it was not enough. While the model notice required under PPA provides good information to participants, it fails to give any context for the numbers presented or educate participants about a type of plan that is often not understood.
The Milliman consultant listened to the concerns of the trustees and helped define their objectives. Given the fixed deadline for the funding notice and the timeframe for decisions regarding upcoming changes, we settled on an initial newsletter to educate and set the stage, followed by the annual funding notice. Later, once decisions are made, another newsletter will explain the changes, what they mean for participants, and how they address the funding issues.
Key objectives of this communication plan are to increase participant awareness so that individuals are not surprised by upcoming changes, and to educate them about how the plan works and about the current economic pressures so they can put what is happening in perspective.
We started by conveying the following messages:
The first newsletter laid the groundwork. It did the following:
Participant awareness of and concern about retirement plans has been heightened by all of the news reports about the economic crisis. This makes proactive communication all the more important and is an opportunity for plan sponsors to engage and educate participants.