OPEB: Other post-employment benefits (OPEB) are benefits that employees may begin to receive from their company once they retire, in addition to pension disbursements.
Life insurance, health insurance, and deferred pay are examples of other post-employment benefits.
“Other post-retirement benefits” is another term for these benefits.
What Are OPEB Benefits (Other Post-Employment Benefits)?
Other post-employment benefits (OPEBs) are benefits that certain firms provide to retirees in addition to pension disbursements.
Paid health insurance, life insurance, and deferred compensation are examples of OPEBs.
Unless the plan documents clearly specify that the employer cannot amend or stop OPEBS, they are not guaranteed.
Other Types of Post-Employment Benefits
Employers may provide retirees with three different forms of OPEBs.
Insurance for health care
Health insurance for retirees is usually offered as part of a group plan, just as it was while the individual was still employed.
The group plan might be the same as what current employees have, or it could be a separate plan only for retirees.
If the retiree has registered in Medicare, the retiree’s coverage will most likely be secondary.
That instance, Medicare will cover a portion of medical expenses, while retiree coverage will cover the rest.
However, because terms differ greatly from plan to plan, retirees should consult their employer’s Summary Plan Description (SPD) for more information.
Life insurance is a type of insurance that protects
Employers may give life insurance to retirees as part of a group plan, similar to health insurance, and it is usually in the form of term life insurance.
Compensation that is paid later
Deferred compensation plans, which are sometimes known as post-employment benefits, give an employee a salary or lump payment at a later date, usually after they retire.
These plans are divided into two categories: qualified and non-qualified, but both serve the same basic purpose: deferring taxes while the employee is still employed and providing income in the future, ideally when the employee is in a lower marginal tax band.
Some employers may provide their retirees with dental and vision care, legal services, and tuition reimbursement, among other things, in addition to those other post-employment perks.
Which companies provide additional post-employment benefits?
Private sector corporations, state, county, and municipal governments, and religious and educational institutions are among the businesses and other organisations that may pay benefits to employees after they retire.
Although these benefits are largely paid for by the employer, retired employees may be required to contribute some of the costs through copayments and deductibles, as well as contributions to the plan while still employed.
Other post-employment perks may be provided by labour organisations to its members.
Other Post-Employment Benefits: How Are They Taxed?
The type of OPEB determines whether pensioners must pay income taxes on it.
In most cases, health insurance is not taxable. 3 If the death benefit exceeds $50,000, employer-paid life insurance premiums may be partially taxed.
Deferred compensation plans occur in a variety of shapes and sizes, depending on whether the employer is a for-profit company, a government agency, or a non-profit organisation.
In either case, the income from such an arrangement is normally taxed in the year it is received by the retiree.
Is there a guarantee of further post-employment benefits?
According to the US Department of Labor, retirees who get various post-employment benefits should be aware that unless there is a clear and specific agreement in writing, their employer can often amend or terminate those benefits at its discretion (DOL).
As a result, it’s worth reading the employer’s or plan administrator’s Summary Plan Description to see how it refers to other post-employment benefits, such as health care.
“If your employer has retained the ability to amend the terms of the plan in the SPD or controlling plan agreement, you may lose coverage at any moment during your retirement,” the Department of Labor warns.
“You should be protected if your employer made a clear pledge to provide certain health care benefits for a set amount of time or for the rest of your life, and did not reserve the ability to amend the plan in any formal written plan instrument.”
Employers may find it costly to fund and administer other post-retirement perks.
They, like many other types of retirement compensation, have severe reporting obligations.
The Financial Accounting Standards Board covers the regulations controlling how corporations should report pension costs and other post-employment responsibilities in Compensation—Retirement Benefits—Defined Benefit Plans—General, among other valuable resources (Subtopic 715-20).
The American Society of Pension Professionals and Actuaries (ASPPA) also provides guidance on how to comply with the mandated disclosure process for actuaries and others.
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