A retiree plan is not the active plan with older people on it.
Two populations, two sets of rules, one line item. A retiree under sixty-five is buying the most expensive coverage of their life in the years before Medicare starts; a retiree over sixty-five is on a plan that pays second to a program you do not control. The design that is right for one is usually wrong for the other, and the promise behind both sits on your balance sheet whether or not anyone has measured it.
There is a way out of the group sponsorship role that still keeps the promise.
A retiree under sixty-five is too young for Medicare and too old to be cheap, which is why this population is the one that breaks a retiree budget. We place a captive arrangement built for exactly this group, and the design decisions inside it are real decisions with real trade-offs.
A Captive Built For The Retiree Group
The pre-Medicare retirees come out of the active plan and into a self-funded group captive of their own. Claims are paid at cost below the stop-loss deductible, with no markup; catastrophic risk transfers to an A-rated, size XV stop-loss carrier; and participating employers share in the captive’s underwriting gains. Pooling at the captive layer is what rewards a good year and absorbs a bad one, which a single small retiree group on its own cannot do.
Priced Off Medicare, Not Off A Network Discount
Retiree costs are benchmarked to Medicare rather than to a commercial PPO discount — targeting 140 to 150 percent of Medicare for facilities and 120 to 130 percent for physicians. The network is a choice: the plan can keep a PPO network, or drop the network entirely and price through a reference-based pricing vendor, which is the cheaper of the two and the one with a trade-off we will name rather than bury — no network means balance-billing exposure has to be managed. Either way the plan can be customized or duplicated so what a retiree carries looks like what they had.
Where Reference-Based Pricing Fits
On an active plan we advise on reference-based pricing case by case and take no blanket position on it. Inside the retiree captive it is not a theory — it is the pricing mechanism, placed as part of the arrangement. That is a deliberate distinction, and it is worth understanding which of the two conversations you are actually having.
Keep The Sponsorship Role Or Hand It Over
This is a choice, not an automatic feature. An employer can stay the ERISA plan sponsor and keep the captive economics, or transfer the sponsorship role to a sponsored trust. Where it transfers, the trust or VEBA becomes the applicant and policyholder, deals with the carrier, arranges administration and collects premiums from retirees. VEBA status for the retiree group also permits a tax-free vehicle for participant contributions.
What A Retiree-Only Plan Is Free To Do
A group health plan with fewer than two participants who are current employees on the first day of the plan year falls outside ERISA Part 7 and the market reforms the Internal Revenue Code carries with it — no annual or lifetime dollar limit rule, no preventive services mandate, no dependent coverage to twenty-six, no ninety-day waiting period limit. That design freedom is a large part of why a retiree plan can be built differently from the active one. The genetic information provisions and the Newborns’ Act still apply.
Offering Coverage And Offering Money Are Different Answers
A former employee who may enroll in retiree coverage but does not is treated as having minimum essential coverage only for the months actually enrolled. So a pre-Medicare retiree who declines is still able to claim a premium tax credit on the Marketplace, and for a modestly paid early retiree that credit can be worth more than a seat on the plan. Enrollment is what forfeits it. Before you move a population, that arithmetic should be run for the people in it, not for the group in aggregate.
How a group health captive is structured →
Finding the pre-Medicare retirees who already qualify for Medicare →
Medicare pays first. What we place sits on top of it.
Most post-sixty-five retiree plans are active-plan designs with a coordination clause bolted on, paying for coverage Medicare already provides. The alternative is a plan built from the start to be the second payer.
Medicare Pays First
A retiree has no current employment status, so Medicare pays first and the retiree plan pays second — the reverse of the order that governs an active employee, which is set out in full where the Medicare rules are. Every sensible post-sixty-five design follows from that sentence, and a plan drafted for primary coverage is paying for risk it no longer carries.
A Group Indemnity Plan On Top Of Medicare
What we place for Medicare-eligible retirees is a fully insured group indemnity plan that supplements Medicare, with access to any provider or hospital that accepts Medicare. Because it sits on top of Medicare rather than replacing it, there is no network to check and no referral question — if Medicare is accepted, the plan follows.
The Trust Holds The Plan
Where the sponsorship role is transferred, the trust or VEBA is the applicant and policyholder. It communicates with the carrier, arranges the plan’s administration, collects and pays premiums and runs the rest of the plan. The employer can still contribute toward the cost, currently or pre-funded, or not at all. This model has been in use for post-sixty-five retirees since 2008.
Ask About The Drug Coverage First
Prescription coverage is the part of a retiree program most often waved through, and it is the part with a federal obligation attached. Whoever ends up holding the plan, the creditable-coverage question has to be answered in writing before anything moves, because telling a retiree their coverage is creditable when it is not is how they end up with a lifetime Part D penalty. We ask for that answer on your behalf rather than assuming it, and the decision it leads to — keep the subsidy or move the coverage into a group Part D plan — is worked through alongside the Medicare rules.
Disability And Kidney Failure Change The Answer
Two exceptions bite. For someone entitled to Medicare on disability, the group plan is primary only where the employer has at least one hundred employees. For end-stage renal disease, the group plan pays primary for up to thirty months regardless of employer size and regardless of current employment status — retirees included. One dialysis claimant in a small retiree group is a thirty-month exposure most sponsors have never priced.
What The Law Allows You To Do Here
An employer may not offer a Medicare-eligible individual an incentive to drop coverage that would be primary to Medicare. Retiree coverage is secondary, which is why the retiree conversation is a different conversation from the active one — and separately, age discrimination rules carry an express exemption for coordinating retiree health benefits with Medicare eligibility. That exemption is the legal ground the whole post-sixty-five design stands on, and it is worth knowing it is there.
A retiree promise is a number on the balance sheet, whether or not anyone has measured it.
Public employers report it under GASB. Private employers accrue it under their own accounting standard. Either way the obligation exists from the day the promise is made, and how it is reported afterward is a question of fact about your plan documents and your transaction.
Michigan public employers also work under Public Act 152, which caps what they may contribute toward employee medical coverage.
What GASB 75 Requires
Governmental employers recognize the net liability for postemployment benefits other than pensions on the face of the financial statements, not in a footnote. It took effect for fiscal years beginning after June 15, 2017, and it replaced Statements 45 and 57. For a school district or a municipality, that changed retiree health from a budget line into a reported number that rating agencies, unions and the local paper can all read.
GASB 74 Is The Plan Side
The companion standard covers the OPEB plan itself where benefits are administered through a qualifying trust, and it took effect a year earlier, for fiscal years beginning after June 15, 2016. It replaced Statement 43. The distinction matters in practice because the plan report and the employer report are prepared on different timetables, and the numbers have to reconcile.
The Levers That Move The Number
An actuary measures the liability; an actuary does not decide it. What decides it are benefits decisions: who is eligible and after how many years of service, whether the promise is a defined benefit or a defined dollar subsidy, whether coverage ends at Medicare eligibility, whether the group is closed to new hires, how the post-sixty-five design coordinates, and whether the sponsorship role stays with you or moves to a trust. Each is a lever, and each has a cost somewhere else.
How we work with public employers →
We do not tell clients what a change in structure will do to their reported liability. That determination belongs to your auditor and your actuary, on your facts, and we will work with them rather than around them.
The failures are administrative, and they are the same six every time.
None of these are exotic. Every one of them is found by reading the plan document against the census and the carrier file, which is the first thing we do.
The Plan Was Never Actually Separated
The retiree-only exception is counted per plan on the first day of the plan year. If one document covers actives and retirees, there is no exception, and the plan has been operating for years on a freedom it does not have.
The Part D Notice Rode Along With Open Enrollment
October 15 is rarely anyone’s renewal date, and the notice has no size exemption, so a small employer with two Medicare-eligible retirees owes it exactly as a large one does. The disclosure to CMS is a second clock tied to the plan year, not the same clock.
Nobody Told The Retiree About Part B
Your retiree plan is paying second. If the retiree skipped Part B because the group coverage felt like enough, the primary payer the plan is coordinating against does not exist, and the retiree absorbs the difference plus a late-enrollment penalty for as long as they are enrolled.
A Re-Employed Retiree Flips The Order Back
Bring a retiree back part-time and they have current employment status again, which makes the group plan primary once more. Claims paid in the wrong order get recovered, and the recovery arrives long after the budget year has closed. The fix is a rehire step that tells the carrier and updates the plan’s eligibility records the same week the person returns.
Eligibility Never Followed Them Into Retirement
Retirees fall out of the payroll feed, which is where most eligibility data comes from. The result is retirees still on the carrier file who should not be, retirees off it who should be, and billing that reconciles to neither.
The Promise Is In A Document Nobody Has Read
A retiree-only plan is still an ERISA plan. The summary plan description obligation survives the exception, and covered retirees count as participants for the hundred-participant test that decides whether a Form 5500 is owed — covered dependents do not. Most sponsors have never checked which side of that line they are on.
The compliance calendar, with the dates →
General information about retiree medical benefits, not legal or tax advice. Plan-specific questions belong with ERISA counsel, and we will bring them in.
Most of these are answered in your own documents
Ten questions employers ask before changing anything about a retiree medical promise.
Can we change or end a retiree medical benefit at all?
Usually yes, and the answer is in your own documents rather than in general principle. Retiree health is not a protected benefit the way a pension is – it does not vest automatically, and most employers have reserved the right to amend or terminate it. But that right only exists if it was written down and was not contradicted by something else you said along the way. Where employers get caught is the gap between what the plan document reserved and what a retirement brochure, a letter or a meeting appeared to promise.
What does our plan document need to say for us to keep that flexibility?
A clear reservation of the right to amend or terminate, stated in the plan document and the summary plan description, in language that is not undercut elsewhere. The phrase courts look past is the confident one in a communication nobody thought was legally operative – a slide reading coverage for life, or a retirement letter written to be reassuring. Consistency across every document matters more than the strength of any single clause, and this is a question for ERISA counsel on your facts rather than for a benefits summary.
Is a retiree health reimbursement arrangement an alternative to sponsoring a plan?
It is one of the main ones. Instead of sponsoring coverage, you fund an account the retiree uses toward premiums and qualified costs, which turns an open-ended obligation into a defined contribution you control. It changes what you are promising – a sum rather than a benefit – so it is a real change to communicate honestly rather than a relabelling. Design detail matters a great deal here, particularly around what the money can be spent on and what happens to any unused balance.
What happens to a retiree’s spouse and dependents?
Whatever your documents say, which is worth checking before anything changes. Spousal and dependent eligibility in retiree coverage is frequently defined differently from the active plan, and surviving-spouse rights are the provision most often forgotten and most painful to get wrong. A structure change that works cleanly for the retiree can leave a spouse who is younger, not yet Medicare-eligible, or already widowed in a materially worse position, and that is usually the case that reaches you personally.
Does a collectively bargained retiree promise work differently?
Yes, because it is a contract as well as a plan. What was agreed at the table governs, it changes on the contract’s clock rather than the plan year’s, and whether a promise survives the agreement that created it is decided by ordinary contract interpretation rather than by any presumption in either direction. There is no shortcut here – the language of the specific agreement is the answer, and labor counsel reads it before anybody models anything.
What do retirees have to be told, and how far ahead?
More notice than the legal minimum, in almost every case. Material reductions carry their own disclosure timing, but the practical standard is different from the legal one: retirees are making decisions on fixed incomes, often with enrollment windows of their own that do not align with your plan year. A change announced late enough to catch someone between Medicare enrollment periods creates a genuine hardship, and that is the version of this that ends up in front of a board.
Does moving retirees off the active plan change what active employees pay?
It should, and quantifying that is part of the analysis rather than a side effect. Pre-Medicare retirees are typically the most expensive population on a plan, so removing them changes the risk the active plan is priced on. Whether the saving shows up depends on your funding arrangement and how quickly your rating reflects experience, but an evaluation that looks only at the retiree line and not at what happens to the active plan is measuring half the decision.
What happens to someone in the middle of a course of treatment?
This is the question to settle before the structure changes, not after. Transition-of-care provisions, where the old and new arrangements agree how an in-progress course is handled, are what keep a person from restarting a deductible or losing a treating physician mid-course. Without one, the individual cases land on HR one at a time, and they are the cases everybody remembers.
What about retirees who have moved out of state?
They are the reason network questions outlive the active plan. Retirees relocate, often to two or three predictable places, and a design that works in Michigan may leave someone in Florida or Arizona effectively uncovered for routine care. Map where your retirees actually live before evaluating any network-based option – it is a short piece of work that changes which options are real.
How long does a change like this take?
Longer than an active-plan change, and it is worth planning in months rather than weeks. There is document work, an actuarial or accounting view to obtain where a reported liability is involved, a communication sequence that has to respect retirees’ own enrollment windows, and frequently a board or council approval step. Employers who start in the autumn for a January change are usually starting too late.
Want to know what your documents actually say? Send us your renewal, or talk it through with someone first. No cost, no obligation.
General information about retiree medical benefits, not legal, tax or actuarial advice. Plan-specific questions belong with ERISA counsel, and reported-liability questions with your auditor and actuary.
Group Retiree Medical in Bloomfield Hills, Planned for the Long Run
Health coverage for retirees is a promise that can last for decades. Many employers made that promise years ago and now face rising costs with no clear plan for the future. Group retiree medical in Bloomfield Hills is about keeping that promise at a cost you can manage.
We are an independent employee benefits consulting firm, in business since 2007. We work with employers in Southfield, Troy, Detroit, Oakland County and across Michigan.
Group Retiree Medical
Group retiree medical is health coverage an employer offers to former employees after they retire. It usually splits into two groups:
- Pre-65 retirees. Most are not yet eligible for Medicare. They often stay on the active group plan or move to a separate retiree plan.
- Post-65 retirees. They have Medicare. The employer plan usually pays second, or the employer offers a group Medicare plan built for retirees.
One group option for retirees 65 and older is a group Medicare Advantage plan. It is often paired with an EGWP, or Employer Group Waiver Plan. That is a Medicare drug plan set up for one employer’s retirees.
How we help with group retiree medical in Bloomfield Hills:
- Review what you promised retirees and what your plan documents say.
- Compare carrier options for pre-65 and post-65 retirees.
- Price out contribution changes and fixed-dollar approaches.
- Help you explain any change to retirees clearly and on time.
- Connect you with ERISA attorneys through the firm before you change a promise.
Can an employer change or end retiree health benefits?
Sometimes. It depends on what your plan documents and any labor agreements say. Some promises can be changed. Others may be locked in. Get legal advice before you act. Our clients get access to ERISA attorneys through the firm, so that step is simple.
How much does retiree medical cost an employer?
It depends on how many retirees you cover, their ages, the plan and how much you pay toward it. Pre-65 retirees are often the most costly group, because the employer plan pays first. After 65, Medicare usually pays first, and your plan pays second. We lay out the cost over several years, so you can see where it is headed before your renewal.
Common questions
Do retirees have to join Medicare at 65?
For retiree coverage, Medicare usually pays first once a retiree is eligible. Many retiree plans expect retirees to enroll in Medicare Parts A and B. We help you spell out the rule in plain words. That rule belongs in the plan document and in the packet each employee receives at retirement, alongside the Medicare enrollment dates that apply to them.
Can small employers offer retiree medical?
Often, yes, depending on the carrier and plan. In Michigan, small group means 50 or fewer employees. We check what your carrier allows. Carrier contracts decide whether retirees can stay on the active small-group plan and on what terms. Where they cannot, a separate retiree arrangement or a fixed-dollar contribution toward individual coverage are the usual alternatives.
Does the Part D notice apply to our retirees?
If your retiree plan includes drug coverage, the creditable coverage notice goes out by October 15. If the drug coverage is not creditable, the notice has to say so, which tells retirees to consider enrolling in Part D. It goes to covered spouses who are Medicare-eligible as well.
Talk to us about group retiree medical in Bloomfield Hills
Send us your renewal or book a 30-minute call. Our office is at 41000 Woodward Avenue, Suite 350 East, Bloomfield Hills, MI 48304. Call 248.370.8853.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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