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Old 04-12-2013, 03:17 PM   #21
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There's never been a penalty for companies not providing retiree health insurance. The biggest change that ACA represents, in that regard, is that it provides a softer landing pad for companies that decide to end retiree health insurance - softer than those retirees would have encountered if ACA wasn't there.
Yes, it will become much easier for employers to just cancel their own plans, hand out a commensurate pile of cash to employees and tell them to buy their own on the exchanges than it is to pull the plug and tell them to navigate the pre-2014 world of individual insurance and no subsidies. Just like with switching from DB pensions to 401K plans, they can shift from funding an unknown future cost into a known future cost, and they like the certainty of the latter.

The difference, again, is that when the employee buys it with employer-provided money, it's taxable to the employee (except to the extent it exceeds 10% of AGI), but when given the direct benefit it's not.
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Old 04-12-2013, 03:31 PM   #22
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Yes, it will become much easier for employers to just cancel their own plans, hand out a commensurate pile of cash to employees and tell them to buy their own on the exchanges than it is to pull the plug and tell them to navigate the pre-2014 world of individual insurance and no subsidies. Just like with switching from DB pensions to 401K plans, they can shift from funding an unknown future cost into a known future cost, and they like the certainty of the latter.

The difference, again, is that when the employee buys it with employer-provided money, it's taxable to the employee (except to the extent it exceeds 10% of AGI), but when given the direct benefit it's not.
And they are doing just that. The article says more than half have already eliminated the retiree benefit, and we know the courts do not view health care as a vested right.

A benefit worth $1K per month, now taxable, means $12k in additional income, some of which may be treated as a deduction. Even a best case means some additional tax.
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