Easing the transition for retirement-age employees
When it comes to the bottom line, the impact of transitioning employees into retirement is unmistakable.
Baby boomers are often your clients’ most skilled and knowledgeable employees. They are valued by the entire team and bring a lot to the table. After fruitful careers, it’s no surprise that many are ready for retirement. But for a number of reasons, retirement is often delayed.
The reality is that retirement-aged employees are many times responsible for a variety of unexpected expenses for employers. A recent study indicated that the cost of one year of delayed retirement can be equal to the cost of sick leave and personal time off on a company-wide basis.
Related: Preparing for retirement: How benefits managers can help older workers
For employees, working past retirement can take a toll on mental and physical health. The same study also found employees over 65 face nearly double the health care costs of workers between the ages of 45 and 54.
Tracing costs
When it comes to the bottom line, the impact of transitioning employees into retirement is unmistakable. This is especially true in a slow or embattled economy, like the one we are navigating as a result of the COVID-19 pandemic.
This was also the case for one client we’ve helped: They traced about 40% of their health care spend to a population of only 12% of their workforce, most of whom were eligible for Medicare or would be within two years. With an optional program in place to help older employees make end-of-career transitions, 60% chose retirement and/or moved to Medicare plans that fit their needs. But more on that in a minute.
Introducing Medicare
Introducing Medicare to employees requires close attention to compliance with rules set by the Centers for Medicare and Medicaid Services (CMS). No employer, regardless of size, can offer any type of incentive to Medicare-eligible employees to terminate enrollment in their group health plan and enroll in Medicare. Employers also cannot contribute to individual Medigap or Medicare supplement policies, which are almost always necessary to replicate existing coverage.
However, a worker has the option to choose Medicare over the group health plan. If this point is effectively communicated through plan documents and regular employee communications, they may see the benefit of declining the group health plan.
This is when benefits advisors and employers may ask themselves: Are Medicare-eligible employees aware of their options, and are we giving them the tools to make the best decision? A robust employee education program can help fill the gaps.
The power of a Medicare concierge
For employees interested in transitioning, it can be hard to know where and when to start, in addition to concerns about eligibility, costs and coverage. This is where a Medicare concierge can provide valuable insight and guidance. A Medicare concierge will accurately communicate employees’ responsibility in managing these costs, as well as their options.
Most employees avoid Medicare because they know their needs will not be met by the basic offering and they aren’t familiar with Medicare supplement plans, Advantage plans and prescription drug coverage. A Medicare concierge will do the heavy lifting, confirming an array of options and pricing so employees considering retirement or Medicare options have full, affordable coverage.
Providing options
Remember that client I referenced previously? The key to their success was to present options to their retirement-eligible or soon-to-be eligible employees:
- Keeping their status as a full-time employee
- Choosing a retirement incentive program
A Medicare concierge explained their options around the federal health insurance program and supplemental policies and assisted with the transition, if the employee expressed interest. The program was completely optional, but many chose to make changes to their employment status and/or insurance. Those who chose retirement were given a generous buyout package and unlimited appointments with the concierge.
In most cases, only employees who have a major stake in the success of the company are willing to take a reduction in benefits while still employed. However, this education does take the pressure off of employees who would otherwise be going it alone.
As I mentioned earlier, through this program, 60% of eligible employees voluntarily retired or moved off of the group plan. As a result, the employer saved hundreds of thousands in health care costs over the next couple of years.
Starting the conversation
Any employer with a number of workers nearing or past retirement age should talk with their employee benefits consultant about workforce education and transition programs. To ensure compliance, it’s important to have these conversations before taking steps.
Implementing programs, including Medicare workshops and financial wellness initiatives, will help them retire “on time,” and year-round informational sessions will ensure they are prepared when that milestone birthday approaches.
It only takes a few simple equations to determine your clients’ costs and potential savings, as well as the impact on the existing employee benefit plan.
John Crable is senior vice president of Corporate Synergies. He consults with private and public sector employers, non-profit organizations, and associations in the design of cost-effective, value-driven benefit plans. He specializes in reducing cost through plan design study, claim analysis, creative funding and diligent negotiations.
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