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Retiree Health Care Issues After the Affordable Care Act

By Larry Bell

Following implementation of the Patient Protection and Affordable Care Act (“ACA”), the funding and providing of promised retiree health benefits has a new series of requirements that must be met by Taft-Hartley retirement plans, employers and plan sponsors. One such requirement is that the escalating liability for post-retiree medical plans (“OPEB”) must now be carried on the balance sheet of plan sponsors. See Financial Accounting Standards (“FAS”) 106 and 157, Government Accounting Standards (“GAS”) 43 and 45, and International Accounting Standards (“IAS”) 19. In addition, the ACA now requires the acceleration of recognition, thereby increasing costs to the employer/plan sponsor, and creating new limitations with retiree drug subsidies (“RDS”). The Center for Medicare and Medicaid Services (“CMS”) has also instituted guidelines for qualifying for reimbursements to employers.

These stringent accounting rules will challenge corporate debt ratings, raise the cost of borrowing when the full annual required contributions are not made, and in turn create larger budget deficits for all types of employers. These rules affect state and local governments as well as for-profit entities such as corporations, law firms and unions, and nonprofits.

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