As health care is one of the greatest expenses in retirement, it's critical for union members to understand their retiree benefits options. The average retiree spends nearly $4,300 on out-of-pocket health care costs each year, and that figure doesn't include long-term care. Health care costs also continue to skyrocket.
Many union members have assumed that their retiree health benefits are vested for life. However, the U.S. Supreme Court upended that belief in 2018, when it ruled against lifetime vesting for a union's retiree health benefits. The court determined that these benefits only last until the union's collective bargaining agreement expires, unless the agreement explicitly states otherwise.
This ruling complicates benefits that may already be uncertain and confusing to some. Union leaders, however, can work with their membership to navigate these options as members near retirement.
Helping Members Understand Retiree Benefits Options
Preparing for retirement can help members stem the rising cost of health care. Encourage your members to take some of these steps to better understand their options.
- Read the fine print of collective bargaining agreements (CBAs). While some collective bargaining agreements outline a health plan and retirement benefits for members, others do not. Last year's Supreme Court case demonstrated that the exact language of the agreement matters. CBAs specifying that retirement benefits are granted on a "lifetime" or "for life" basis, extending beyond the duration of the CBA, should reassure members their benefits are likely to continue. Other CBAs, however, may allow benefits to expire once the CBA ends. If the agreement doesn't outline the retirees' health plan, or the language is ambiguous, union members may want to consider additional health care options.
- Be aware of retiree benefit trends. Union members should know that private sector employers aren't required to promise health benefits for retirees. What's more, when employers do offer retiree health benefits, no law prevents them from eliminating those benefits, unless they have specifically promised to provide them. In 2018, the Kaiser Family Foundation reported a decrease in the share of large firms offering retiree health benefits, with just 18% of large firms offering retiree coverage as well as health benefits for current employees. Large firms that have at least some union workers, however, are more likely to offer retiree health benefits than those without — 29% versus 14%, respectively.
- Review the details of plan documents. Union members should familiarize themselves with the terms of their employer-provided retiree health benefits by reviewing plan documents. The summary plan description outlines the plan's terms, and employers must provide a copy. Look for language on health benefits after retirement. Sometimes, even if a specific promise is made to provide retiree benefits, language will also be included that gives an employer the right to change or terminate the promise or the entire plan.
- Learn about Medicare. For members who are 65 and older with retiree insurance, the coverage almost always pays second to Medicare, meaning members will need to enroll in Medicare to be fully covered. Some policies require retirees to sign up for both Medicare Parts A and B once they're eligible. Help your members understand these nuances and what action they may need to take to ensure benefits.
- Explore additional options for retiree benefits. Some union retirees with original Medicare coverage (Part A and Part B) and no other coverage might benefit from additional insurance to help limit out-of-pocket costs, especially if they have a chronic condition or anticipate frequent medical care during retirement. Private Medicare plans offered by private companies are optional and provide more coverage. Individual union members should also review private plans to see if one might make sense for them.
By working to educate union members on their retiree benefits options well ahead of time, you're helping to make their transition into retirement a smoother one overall. Consider holding an informational session for union members nearing retirement to brief them on their options and answer any questions that might arise.
With 15 years' experience writing for publications including The Wall Street Journal, Barron's, The Christian Science Monitor and Newsday — Deborah Blumberg specializes in business and finance and health and wellness. She writes about topics including corporate communications, financial markets, real estate, renewable energy, cancer, health education, nutrition, supplements, the microbiome and functional medicine. She was a Knight Center fellow and a Donald W. Reynolds National Center for Business Journalism fellow. Her time working in marketing and communications at JPMorgan Chase taught her how to best tell a company's story. She's adept at turning complex ideas into compelling copy. She's also an officer of the American Society of Journalists and Authors (ASJA) and a Women in the Visual and Literary Arts board member, and she is fluent in Spanish.