What Are Other Post-Employment Benefits (OPEB)?

What Are Other Post-Employment Benefits (OPEB)?

Let me explain what other post-employment benefits, or OPEB, really are. These are the benefits you might start getting from your employer after you retire, excluding pension payments. They can cover things like life insurance, health insurance, and deferred compensation. People sometimes call them other post-retirement benefits.

Key Takeaways

OPEB are those extra benefits some employers give to retirees, not including pensions. They might include paid health insurance, life insurance, and deferred compensation. Remember, these aren't guaranteed unless the plan documents clearly say the employer can't change or stop them.

Types of Other Post-Employment Benefits

The main types you should know about are health insurance, life insurance, and deferred compensation. I'll break them down for you.

For health insurance, it's usually part of a group plan, similar to what you had while working. It could be the same as for current employees or a separate one for retirees. If you're on Medicare, this coverage often acts as secondary, meaning Medicare pays first and the retiree plan covers some of what's left. Plans vary, so check your employer's Summary Plan Description (SPD) for the specifics.

Life insurance for retirees is typically group term life, but it usually ends when your employment does, like upon retirement or termination.

Deferred compensation means you get a salary or lump sum paid out later, often after retirement. There are qualified and nonqualified types, but they both defer taxes while you're working and provide income later, hopefully when you're in a lower tax bracket.

Beyond these, some employers throw in dental and vision care, legal services, or tuition reimbursement as additional benefits.

Which Businesses Offer Other Post-Employment Benefits?

You can find OPEB from private-sector companies, state, county, and municipal governments, as well as religious and educational institutions. While mostly paid by the employer, you might have to chip in through co-payments, deductibles, or contributions while working. Labor unions sometimes provide these to their members too.

How Are Other Post-Employment Benefits Taxed?

Taxation depends on the benefit. Health insurance coverage isn't usually taxable. For employer-paid life insurance, premiums might be partially taxable if the death benefit is over $50,000. Deferred compensation gets taxed in the year you receive it, and the setup varies if it's from a for-profit business or a government/non-profit.

Important Note on Medicare

Most employers require retirees who are 65 or older and eligible for health benefits to enroll in both Medicare Part A and Part B, as per the U.S. Centers for Medicare & Medicaid Services.

Are Other Post-Employment Benefits Guaranteed?

Unless there's a clear written agreement, your employer can often change or eliminate these benefits, according to the U.S. Department of Labor. Check the Summary Plan Description to see if they've reserved the right to alter terms. If they have, you could lose coverage during retirement. But if they promised specific benefits for a set time or life without reserving changes, you're likely covered.

Implications for Employers

Funding and administering OPEB can be costly for employers, and they come with strict reporting rules. The Financial Accounting Standards Board covers this in their guidelines on Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20). The American Society of Pension Professionals & Actuaries provides compliance advice for actuaries and others.

What Is the Biggest Other Post-Employment Benefit?

Medical insurance is usually the most significant OPEB, though life insurance and others are included.

How Does Deferred Compensation Work?

It withholds part of your pay until a set date, like retirement, deferring taxes. It's often used to retain key employees.

Can Your Employer Cut Your Retiree Health Benefits?

Yes, under some circumstances, especially if they didn't promise in writing not to. Private employers aren't required to provide these, and they can reduce them unless specified otherwise.

The Bottom Line

Getting a handle on your OPEB helps you plan retirement better. I suggest talking to a financial advisor to review how these fit into your overall plan.