Benefits January 3, 2012

Retiree Health Benefits Could Encourage Early Retirement

January 3, 2012 (PLANSPONSOR.com) – New research indicates that having employer-sponsored retiree health benefits could encourage workers to retire before age 65. 

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A working paper from the National Bureau of Economic Research (NBER) says its study found retiree health coverage has its strongest effects at ages 62 and 63, resulting in a 3.7 percentage point (21.2%) increase in the probability of turnover at age 62 and a 5.1 percentage point (32.2%) increase in the probability of turnover at age 63. It has a more modest effect for individuals under the age of 62.   

According to the paper, a more generous employer contribution of 50% or more raises turnover by one to three percentage points at ages 56-61, by 5.9 percentage points (33.7%) at age 62, and by 6.9 percentage points (43.7%) at age 63. Overall, an employer contribution of 50% or more reduces the total number of person-years worked between ages 56 and 64 by 9.6% relative to no coverage.  

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NBER researchers investigated the impact of retiree health insurance on early retirement using employee-level data from 64 diverse firms that are clients of Towers Watson.  

The working paper is available for purchase ($5 for electronic delivery) at http://www.nber.org/papers/w17703.
Compliance January 3, 2012

Oregon High Court Approves Collection of Retiree Overpayments

January 3, 2012 (PLANSPONSOR.com) - The Oregon Supreme Court has ruled the state's pension system can collect $156 million in overpayments to retirees.
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The court affirmed an earlier ruling upholding the right of the Public Employees Retirement System to collect the overpayments. In a second decision, it found the retirement system did not violate the rights of members by agreeing to a settlement agreement that authorized collecting the money, the Associated Press reports.  

The two rulings end years of litigation and negotiation over the money paid to 28,000 people from 2000 to 2004. The issue arose when Marion County Circuit Judge Paul Lipscomb ruled the pension system’s board should have put more of the pension fund’s 1999 earnings into reserves instead of beefing up workers’ pension accounts (see Oregon PERS Ponders Pension Payback Details). The Oregon Supreme Court, in 2005, let that decision stand.  

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The ruling affects workers who joined the system before 1996 and received pension investment earnings in their accounts for 1999. Pension accounts of those employees who still are working are to be reduced. Workers who retired from April 1, 2000, through March 31, 2004, or otherwise left public employment could have to pay back some money to the system.

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