Prefunding Health Benefits
William F. Robinson, Jr.
Area Vice President
Gallagher Byerly, Inc.

How will Americans respond to the growing concern that they will be unable to afford health care after they retire? According to Bill Robinson, setting aside funds during employment, and giving them tax-favored treatment, are the most promising options.

Robinson reviewed the benefits and drawbacks of the four primary types of prefunding vehicles:

• Voluntary Employee Beneficiary Associations (also known as or 501(c)(9) plans),
• 401(h) pension subaccounts,
• Integral Participants/State Grantor Trusts, and
• General Asset Accounts.

There are several key considerations any organization contemplating a prefunding program must resolve. They include deciding whether there will be employer or employee funding, the sources of employer funding, deciding on mandatory vs. elective participation, benefit design, eligibility, vesting, portability, and administration.

Plan managers will also need to consider the effect such a prefunding feature would have on existing pension benefits.

Robinson has over 30 years of employee benefits experience. He specializes in large public health plan consulting, having served as primary consultant to five state employee health plans.  His subspecialties include alternative funding arrangements, governmental joint purchasing, managed care and flexible (cafeteria plan) benefits.

© 2003 National Conference on Public Employee Retirement Systems

  http://www.ncpers.org