More Retirement Planning Considerations
As June 30 approaches, which, in our experience, is the second most common retirement date after December 31, today’s video presents some important issues some might need to factor into their planning for retirement. These are not common issues and they can be complicated because employers, particularly employers with self-insured plans, can have different interpretations or practices toward given retiree medical situations. As a result, it is often desirable to consult with your Human Resources or Benefits staff regarding your retirement plans.
Having rewatched the video myself, it is a bit clunky due to many retakes. My apologies. This is dense material and I probably should have made multiple videos on this topic but we are moving forward!
First, we address below some planning considerations for a couple who are close in age but the older spouse retires on to Medicare first. This topic stems from our dealings with clients who thought a younger spouse was eligible for 36 months of COBRA but was only allowed 18 months.
Then we discuss issues associated with an individual who is eligible for retiree medical from a former employer and is eligible for active group coverage from a current employer. In this discussion we also address the need to be mindful of an employer’s requirements for a spouse’s eligibility for retiree medical.
Finally, we discuss the not so common but important situation when multiple sources of good retiree medical are available to a single retiree or a couple.
Planning for younger spouse to transition from COBRA to Medicare rather than individual insurance (if possible)
Many couples understand that coverage options in the individual market are often not as attractive as group coverage. Hence, they plan to maximize the length of COBRA coverage for the younger spouse so the older spouse can retire but COBRA is available for the younger spouse to age 65 and Medicare eligibility. Obviously, this is not possible if there is a significant age difference between the two spouses. Remember, the discussion below applies to employers of 20 or more people which are subject to federal COBRA. Smaller employers who offer fully insured plans are subject to state-based COBRA or so-called “mini-COBRA” and state laws vary widely.
We have discussed in previous videos the desirability of going on to Medicare Part A at 65 even if you are eligible for active group coverage and working beyond age 65, unless you have a health savings account that will continue to be funded. The purpose in going on Part A is not so much for the additional coverage, although that can be important in some situations, because the group coverage is primary. Enrolling in Part A is usually done to obtain your Medicare number which for the last several years has been a random number Social Security generates and NOT your Social Security number.
In those instances when the younger spouse is between 18 and 36 months younger than the older spouse, however, it is sometimes advisable to postpone the older spouse going on to Medicare Part A. Losing eligibility for group coverage due to the employee transitioning to Medicare can be a qualifying event that entitles the younger, “dependent” spouse to have 36 months of COBRA rather than 18 months. Some employers will interpret that the younger spouse is not eligible for more than 18 months of COBRA if the older spouse had previously gone on Medicare Part A even though Part A is secondary.
It is likely best to consult with your Benefits Department if you work for a large company unless, of course, keeping your retirement plans confidential is more important than understanding your employer’s approach to this issue. At any rate, if this is a consideration for you, it may be that the older spouse would plan to transition to Medicare a month or so prior to retirement so that the qualifying event for the younger spouse is clearly the older spouse’s transition to Medicare and NOT the retirement itself.
Eligible for retiree medical but working and eligible for active group coverage through current employment
Retiree medical benefits are not as common as they used to be and are often not as attractive as they used to be. However, some employers continue to offer very good retiree medical packages. It is extremely important to understand if your employer or your spouse’s employer offers retiree medical, evaluate its importance to you, and plan accordingly. Most of the discussion below is only relevant to those who have benefits through a large corporation with generous benefits or through the government. Smaller employers generally don’t offer retiree medical benefits.
When planning retirement, it is important to understand what your employer and/or a spouse’s employer offers in terms of retiree medical. If only one employer offers retiree medical and it is attractive, both individuals need to understand the eligibility for spousal retiree medical. Some employers require the dependent spouse to be on the plan before the one with the retiree medical benefits retires to be eligible for those benefits.
Some people are eligible for retiree medical from one employer but start another position where they are eligible for active group coverage. Typically continued active group coverage maintains one’s eligibility for retiree medical. What you don’t want to run afoul of in these complicated situations is losing access to retiree medical without actively deciding to do so. Often, once you opt not to elect retiree medical, you are no longer eligible.
Enrolled in more than one retiree plan
This discussion also applies to those who work for large corporations or the government which offer attractive retiree medical benefits. Despite the relative scarcity of generous retiree medical benefits, we continue to occasionally deal with clients who are eligible for more than one source of retiree medical. This is a situation that requires careful consideration. First, evaluate the coverage as far as benefits are concerned. Second, understand the amount you contribute toward that coverage. Third, decide whether to keep both sources of retiree medical.
At times dealing with the combination of Medicare as primary and two sources of retiree medical is more of a hassle than it’s worth. However, you don’t want to give up coverage you may not be able to get back. Understand, however, that some retiree coverage is not as attractive as what you can buy on your own as an individual, so research is important. Finally, if you keep more than one source of retiree medical, be very careful to understand which should pay as secondary and which should pay as tertiary (assuming Medicare is primary). This is all the more complicated when spouses both have more than one source of retiree medical coverage and they are each eligible for coverage on the other’s plans. You do not want to be cavalier about coordination of benefits issues because plan documents typically have language which allows the insurer to recoup payments that were not paid in the proper order.
The point of today’s video is to encourage everyone to cautiously plan retirement and a spouse’s retirement factoring in the best possible scenarios to maintain the best healthcare coverage you can.
