What Are Other Post-Employment Benefits (OPEB)?
Other post-employment benefits (OPEB) are the benefits, beyond pensions, that employees may receive from their employer beginning at retirement. These benefits often include life insurance, health insurance, and deferred compensation. These are also known as ‘other post-retirement benefits.’
Key Takeaways
- Other post-employment benefits (OPEBs) are non-pension benefits provided to retirees, like health insurance, life insurance, and deferred compensation.
- These benefits are not always guaranteed unless the plan specifies that the employer cannot alter or discontinue them.
Embrace Your Retirement with Health Insurance
Retiree health insurance is typically a continued group plan that may cover retirees either under the same terms as current employees or through a special plan just for retirees. If enrolled in Medicare, the retiree insurance usually acts as secondary coverage.
Life Insurance: A Safety Net in Retirement
Employers often offer group life insurance even after retirement, commonly as term life insurance. Coverage usually ends once employment ceases, including at retirement or termination.
Unlock Future Financial Security with Deferred Compensation
Deferred-compensation plans are designed to postpone receiving a portion of your income until a specified future time, often after retirement. These plans, categorized into qualified and non-qualified types, aim to defer taxes initially and provide future income generally at a time when the retiree is in a lower tax bracket.
Additional Perks Beyond Traditional Benefits
Besides health and life insurance, and deferred compensation, employers may offer other perks such as dental and vision care, legal services, or tuition reimbursement post-retirement.
Which Organizations Offer OPEB?
OPEB can be sponsored by diverse workplaces including private companies, governments, educational institutions, and labor unions. Employees might share a fraction of the costs via copayments, deductibles, or prior contributions.
Tax Implications of OPEB
Taxability of OPEB varies with the type of benefit. Generally, health insurance isn’t taxable, but employer-paid life insurance premiums could be partially taxable. Deferred compensation is taxed when it is received by the retiree.
Are OPEBs Always Secure?
OPEBs often lack guarantees unless formally documented. It’s important to check your employer’s Summary Plan Description (SPD) for any clauses reserving the employer’s right to change or eliminate the benefits, which could affect your coverage.
Implications for Employers
Offering OPEB entails considerable cost and complex reporting requirements for employers. The regulations for OPEB reporting are detailed under standards like the Financial Accounting Standards Board’s guidelines.
The Most Significant OPEB Benefit
Typically, medical insurance stands out as the most critical OPEB, followed closely by life insurance and additional benefits.
Understanding Deferred Compensation
Deferred compensation is a pay arrangement where part of your salary is set aside to be paid in the future, typically upon retirement, to delay and potentially minimize tax burdens. It also serves as a retention tool for key employees.
Can Retiree Health Benefits Be Revoked?
Employers, particularly in the private sector, are not obliged to provide or continue health benefits post-retirement unless they’ve committed in writing to maintaining these benefits.
The Bottom Line
Grasping the full scope of your OPEB can significantly bolster your retirement strategy. Consulting with a financial advisor can be invaluable in ensuring an optimal plan for your retirement years, considering all available post-employment benefits.
Related Terms: Pensions, Medicare, Tax Planning, Financial Advice.
References
- Governmental Accounting Standards Board. “Other Postemployment Benefits (OPEB)”.
- Medicare.gov. “Retiree Insurance”.
- IRS. “IRC 457(b) Deferred Compensation Plans”.
- Internal Revenue Service. “Group Term Life Insurance”.
- Centers for Medicare & Medicaid Services. “Medicare Decisions for Those Over 65 and Planning to Retire in the Next 6 Months”, Page 4.
- U.S. Department of Labor. “Can Retiree Health Benefits Provided By Your Employer Be Cut?”
- U.S. Department of Labor. “Can the Retiree Health Benefits Provided by Your Employer Be Cut?”
- Financial Accounting Standards Board. “Accounting Standards Codification”.
- American Society for Pension Professionals. “Managing the ACS 715 Process”.
- National Association of State Retirement Administrators. “Other Post-Employment Benefits”.
