What Are Other Post-Retirement Benefits?

What Are Other Post-Retirement Benefits?

Let me explain what other post-retirement benefits are: these are benefits, aside from pension distributions, that get paid to employees during their retirement years. You might see them including life insurance and medical plans, or premiums for those, plus deferred-compensation arrangements.

While these benefits are mostly covered by the employer, as a retired employee, you often share in the cost through co-payments, paying deductibles, and making contributions to the plan when required. You should know that other post-retirement benefits are also commonly called 'other post-employment benefits (OPEB).'

Understanding Other Post-Retirement Benefits

When I talk about the benefits in this category, I'm referring to all the non-cash payment benefits available to employees, such as dental, vision care, legal services, and tuition credits. These additional benefits, combined with traditional pension benefits, can represent a large expenditure for companies that offer them, especially if the plans are fully funded by the company.

You can find the costs of these plans in a company's financial statements, usually in the notes, which will also disclose the size of the obligation along with how well funded the fund is.

Post-retirement benefits may be provided by local and federal government agencies, private and public companies, and nonprofit institutions, such as charities, religious groups, colleges, and universities. Such benefits may be paid for (in full or in part) by the employer, the retiree, or a combination of the two.

Other Post-Retirement Benefits and Cost

Direct contributions that pay for any post-employment benefits can expose an employer to certain risks and liabilities. For instance, consider a former worker who is granted health insurance coverage at the same cost or premium rates as current employees.

Typically, a retired worker will be older than the average current employee, and therefore more likely to incur higher medical expenses. With this in mind, insurers may charge higher group rates to employers who intend to keep retired employees on the plan. However, with Medicare kicking in at 65, they would likely only be covering younger retired employees for a relatively short timespan.

As with other forms of retirement compensation, other post-retirement benefits can come with stringent reporting requirements due to their costs to an organization, as well as for the overall return on investment compared to the value of the work employees have performed before retirement.

Other Post-Retirement Benefits and Compliance

The rules governing how companies report pension costs and obligations, as well as the disclosure of pension assets and obligations, are covered under Accounting Standards Codification Section 715 (ASC 715), formerly called the Statement of Financial Accounting Standards Nos. 87/88/158. The American Society of Pension Professionals & Actuaries (ASPPA) provides a guide on how to manage the ASC 715 process, which describes the disclosure information for a client’s financial reports, as well as lists the methodology used to complete the required actuarial calculations.