Printer-Friendly Version

Archived News Release--Caution: information may be out of date.

EBSA Press Release: Labor Secretary Reich Urges Workers, Retirees to Know Their Rights Regarding Health Care Benefits in Retirement [10/28/1996]

For more information call: (202) 219-8211

Labor Secretary Robert B. Reich today issued an advisory aimed at helping workers and retirees protect their health care in retirement and he promised his agency would continue efforts to ensure that companies honor their pension promises.

Citing the threat of health benefit losses to thousands of former employees of General Motors and Pabst Brewing Co., Reich expressed concern for the plight of retirees when employer-promised health benefits evaporate.

"If these companies promise lifetime benefits to retirees, they should be required to keep that promise," Reich said. "Americans who have worked their entire lives should be able to rely on promises from their employers."

Many people nearing retirement age or already retired may believe they have health coverage only to discover clauses in their benefit packages that allow employers to void that part of the agreement.

Labor Department statistics indicate a steady decline in retiree health coverage by U.S. companies. In many cases, the companies dropped retired workers who believed they had been promised benefits for life. Reich said it appears that while fewer employers are providing health care in retirement, the cost of obtaining care is escalating.

According to a study by the department, entitled "Retirement Benefits of American Workers":

• Less than one-third of retirees age 55 and over -- representing 4.7 million of 17.4 million retired persons -- have health benefits from a prior employer, dropping from 37 percent in 1988 to 27 percent in 1994.
• Nine out of 10 retirees with coverage reported they expect it to be available for life, rather than for a stipulated period of time. In fact, many of those workers retirement contracts probably allow their companies to terminate benefits at any time.
• Health insurance premiums of retirees increased from $778 in 1988 to $840 in 1994 (after adjusting for inflation) while the number of employers requiring retirees to pay all or part of the insurance premium increased.
• A recent study showed that premiums for Medigap coverage, insurance that pays what Medicare does not, have increased as much as 23 percent in just the last three years.

To help retirees and workers understand their health programs, the department's Pension and Welfare Benefits Administration unveiled an advisory which highlights things they need to know. Reich noted that the key to understanding health benefits rests in the documents governing benefit programs. Workers should:

• Get copies of their company's plan documents to begin understanding what actually has been promised.
• Review the plan's summary plan description and other written plan documents with the following questions in mind: "Does my company promise health benefits after retirement? If so, for how long and at what level? Does the plan documents include language that allows my employer to reduce or terminate my benefits?"

Today's effort to draw attention to the growing decline in such coverage is closely tied to other actions taken by the department, which has filed friend-of-the court briefs involving cases for Pabst and GM retirees.

Free copies of the advisory can be obtained by calling PWBA's Publication Hotline at 202/219-9247 or via the Internet at http://www.dol.gov/ebsa/pubs/brief1.htm.

Archived News Release--Caution: information may be out of date.