Understanding Other Post-Retirement Benefits
Other post-retirement benefits, often abbreviated as OPEB, refer to perks and services provided to retirees that extend beyond traditional pensions and basic healthcare coverage. These benefits can include a wide variety of non-cash payment benefits such as dental and vision care, legal services, life insurance, and even tuition credits.
Importance and Cost Implications
Offering a broad spectrum of post-retirement benefits can be seen as a magnanimous gesture from employers, but it’s not just about playing Santa Claus after retirement. These benefits play a crucial role in shaping a company’s attractiveness as a long-term employer and affect its financial standing. For instance, providing legal services might keep retirees out of trouble, potentially guarding the company’s storied reputation.
Employers and retirees often share the costs associated with these benefits. From a financial perspective, the funding of these benefits must be meticulously planned as they can represent a significant liability on the company’s balance sheet.
Risk and Compliance in Post-Retirement Benefits
There’s more drama in the world of post-retirement benefits than in a daytime soap opera, especially concerning compliance and risk management. For example, offering a retired employee health insurance at the same cost as current employees could lead to higher expenses than anticipated, as older individuals generally require more medical services.
Accounting for these benefits also requires stringent compliance with standards such as ASC 715, ensuring all liabilities and obligations are transparently reported in the company’s financial statements.
Terms Related to “Other Post-Retirement Benefits”
- Defined Benefit Plan: A pension plan where benefits are calculated through a formula considering factors like salary history and duration of employment.
- ASC 715: Accounting Standards Codification Section 715 dealing with the disclosure of post-retirement benefits.
- Deferred Compensation Plans: Plans where part of an employee’s income is paid out at a later time, typically after retirement, providing tax and savings advantages.
Suggested Reading
- “The New Retirementality” by Mitch Anthony
- “Retirement Income Redesigned” by Harold Evensky and Deena Katz
By traversing through the thickets of retirement benefits, both employers and retirees can find a mutual ground that benefits both parties, ensuring a golden period post-retirement that is as shiny as it is secure. Keep an eye on those benefits; they’re not just footnotes in your retirement plan, but potential game changers!
