Don Parry toiled at IBM for more than three decades assured that his retirement benefits were guaranteed only to find that nothing is as he expected.
"The mystery is that we don't know what's going to happen," said Parry, who retired to the Jacksonville, Fla. area in 1990 after 32 years with the computer behemoth. "We're sitting in limbo."
This month, IBM announced that the benefits of about 110,000 of its retirees would be administered by Extend Health, a private exchange run by Towers Watson & Co., beginning on Jan. 1. IBM said it was making the move to help protect its retirees from skyrocketing costs.
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For Parry, like many retired IBM employees, the reality of life after work is different than what they might have imagined as health costs have, indeed, climbed sharply. The 80-year-old, who pays about $150 a month into the company plan and $200 into a Medicare Advantage plan to cover he and his spouse, said the company's culture had changed as much as anything.
Parry, who worked in everything from sales to installing systems, remembers managers telling workers that they were lucky to be at IBM because they were guaranteed benefits for life.
"They made promises they didn't keep," he said. "I'm angry. IBM used to be the greatest company in the world. IBM is participating in screwing its employees and the middle class."
IBM, of course, disagrees, saying it was doing what it believes is best for its retirees.
Other large companies, including GE, Time Warner and Wal-Mart have announced plans that will force retirees from company health plans to the private exchanges and Medicare. Time Warner's plan is similar to that outlined by IBM. Both companies said they would provide cash payments to their retirees that could be used to purchase insurance.
GE was one of the first large U.S. employers to go this route, announcing it last year. Caterpillar Inc. and DuPont Co. also have moved Medicare-age retirees onto the Extend Health exchange.
More companies are expected to follow suit. The number of retirees who might be affected over the long term is unknown, but a Towers Watson survey in August found that 44 percent of companies expected to move retirees off their health benefits by 2015 alone.
"They (employers) see the exchanges as logical places for them (the retirees)," National Business Group on Health President Helen Darling said, portraying the change as adding diversity and stability to the marketplaces. "These are people that public policymakers wanted to get into the pool."
Driving the trend are medical costs that have spiraled ever higher. IBM, for one, said its retirees' health costs would have tripled by 2020 if it had not made the changes.
The stark reality was driven home by an AARP report that found that annual health care costs for retirees rose from about $2,800 in 1990 to $8,400 in 2012. Those costs are delaying retirement for many, according to the Employee Benefits Research Institute. Its survey put the figure at 53 percent who said they planned to delay retirement because of concerns about the cost of health care.
Brian O'Keefe, a lawyer who represents Detroit pensioners, said concern among his clients is running high.
"They're terrified," he said.
He added that the stipend Detroit is considering, in the ballpark of $200 per month, was paltry when compared to current plans that cost $400 or more plus prescription coverage. "What's that going to buy them?" O'Keefe asked, referring to the stipend.
The same concerns can be found among non-union GE retirees who are being shifted into private health care exchanges in 2015.
James Clark, president of a union that represents about 8,000 GE workers, echoes others in lamenting broken promises of the past and the affect on retirees who see benefits lost.
"For years we've had companies who have gone insolvent and been unable to live up to their obligations," he said. "People have worked for years, have deferred wages. It's very sad."
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