Summary: Retiree health benefits under an employer-based health care system are not secure because employers can change both their employee and retiree health benefit plans at will. In response to rapidly rising health benefit costs, employers have generally tried to shift costs to participants. Only a small percentage of employers surveyed in studies GAO reviewed had actually eliminated medical services for retirees, but at least four employers had announced plans to do so. The new accounting standard (FAS 106), which highlights the magnitude of the liabilities, has also spurred changes to retiree health benefit plans. Many companies claim that they have modified retiree health benefits because FAS 106 reduces reported income and shareholder equity. The Employee Retirement Income Security Act of 1974 authorizes the federal government to regulate retiree health benefits. Recent court decisions have allowed employers to modify or terminate health benefits for current and future retirees if they reserved the right to do so in benefit plan documents or collectively bargained agreements.
