The retiree health number on your statements is a design output, and design can move it.
Public employers report retiree health obligations under GASB 75; private employers accrue them under their own accounting rules. Either way, the number reflects promises the plan makes: who is eligible, what the employer pays and when Medicare takes over. We model how design decisions move that number, and your actuary and auditor measure it.
Four design choices move the liability. None of them is an accounting assumption.
Actuarial assumptions belong to the actuary. Plan design belongs to you, and it is the part you control.
Eligibility
Age and service rules decide who earns the promise and for how long. Changing eligibility for people not yet retired changes the obligation without touching current retirees, which is why it is usually modeled first. Eligibility changes are often the first retiree liability lever.
The Medicare Cutoff
Where employer coverage ends or shifts to a supplement at 65, the most expensive years of primary coverage are bounded. We model the cutoff together with the post-65 plan, because the two decisions work as a pair. The Medicare cutoff and post-65 plan shape retiree liability together.
A Defined-Dollar Subsidy
A fixed employer contribution rises only when you decide to raise it, instead of with every premium renewal. That changes how medical trend flows into the valuation, which the actuary then measures. A defined-dollar subsidy caps retiree cost growth. You decide when it rises.
Where Sponsorship Sits
Who sponsors the plan and holds the promise shapes how the obligation is carried and reported. Any change there is a legal and accounting question first, so counsel and your auditor decide it with us at the table. Plan sponsorship changes require legal and accounting review.
Pre-65 retirees in the active plan create a subsidy even when they pay the full premium.
When retirees pay the same blended rate as active employees, their expected claims exceed what they pay. That implicit subsidy is part of what gets valued.
Why It Exists
A blended rate averages young active employees with older retirees. The retiree pays the average but costs more than it, so the plan carries the difference even when the employer contributes nothing toward retiree premiums. The implicit subsidy is a hidden retiree health cost.
Why It Is Missed
No invoice shows the implicit subsidy. It surfaces in the valuation, which is why employers who believed retirees paid their own way are sometimes surprised by the number. Valuations reveal the implicit retiree subsidy. No invoice ever shows it, so the valuation is where it first appears.
What Changes It
Rating retirees separately, or moving them into a plan of their own, changes how that subsidy arises. How the actuary then measures it is the actuary’s call, and we give them the plan data they need to make it. Separate rating changes the retiree subsidy.
We model the plan. The actuary values it. The auditor reviews it.
Each role stays in its lane, which is why the result holds up at audit.
Before the Valuation
We supply clean census, plan design and premium data to the actuary. Better inputs narrow the assumptions they have to make, so the valuation reflects your plan rather than a default. Clean data improves retiree liability valuations. Better inputs mean fewer assumptions.
Scenario Modeling
We model how each design option changes projected employer cost over time, in plain figures a board or council can read. The actuary then values the options you decide to pursue. Scenario modeling makes retiree liability decisions clearer. Plain figures help boards.
Governance
Changes to a retiree promise often need board, council or bargaining approval. We prepare the materials and the retiree communication, so the decision is made with its consequences visible. Governance materials support retiree benefit decisions. Approval often requires board or council action.
What finance teams ask about the retiree liability.
Can moving retirees to a new plan eliminate the liability?
No. A promise that remains is still an obligation. Design changes can change its size and how it grows; the actuary measures the result and the auditor reviews it. Design changes affect retiree liability, not its existence. The actuary measures the result.
Can we change benefits for current retirees?
That depends on plan documents, bargaining agreements, state law for public employers and what retirees were told. Counsel decides it, and we do not model a change as available until that question is answered. Legal review comes before any retiree benefit change.
When should this be reviewed?
Ahead of each valuation and before any renewal that changes retiree rates. Design decisions made between valuations are the ones that move the next number. Pre-valuation reviews keep retiree liability decisions timely. Decisions made between valuations move the next number the most.
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.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →