Consortium to Address Retiree Health Benefits
By Gwendolyn Bradley
A group of colleges and universities announced in May that they have joined a consortium that will administer a new defined-contribution post-retirement healthcare program and several supplemental health-care plans for retirees on Medicare. The consortium, an independent nonprofit entity, is called the Emeriti Consortium for Retirement Health Solutions and was founded by two academics. Linda Evers Cool, a professor of anthropology at Union College in New York , and Kenneth Cool, a former literature professor and Vassar College administrator, say the idea for the plan grew out of their Mellon Foundation funded retirement research project in the 1990s. Their research found that the academic workforce was rapidly aging and that more professors were delaying retirement at least in part because of anxieties over the cost of health care.
Medicare currently covers only a portion of most retirees' health-care costs, and such costs are escalating rapidly both in and outside of academia. The trend in the for-profit sector is to shift larger portions of health-care costs to employees, and the Cools say that more and more colleges and universities have been following suit. Traditional defined-benefit programs, in which retirees are guaranteed certain benefits regardless of cost, are on the decline.
The defined-contribution savings plan offered by the consortium, which will be administered in partnership with financial services company Fidelity Investments, acts much like a 401(k) retirement account. Employees and employers can make tax-free payments into a trust, the funds are invested, and after retirement employees make tax-free withdrawals to pay for medical expenses. Account holders can choose how aggressively or conservatively their funds are invested.
The supplemental health-care plans fill in the gap between what Medicare pays for and what retirees actually need. They will be administered by health-insurance provider Aetna . The consortium plans to add other partner companies in the future.
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