Everybody gets older, and employees you’ve kept happy will reach their golden years during a long tenure with your business. You want their transition to retirement to go smoothly, so it’s important to keep in mind that, because health insurance is largely employment-based, any change may be confusing for your retiring employees.
Here’s how to provide some clarity and guidance:
- Retirement has to be the employee’s idea. If you say, “Hey, Joe, you’re 64. Are you retiring next year?” and then later you have to reprimand Joe for a mistake, you might find yourself facing an age-discrimination lawsuit. There are very few times when an employer can initiate retirement; for instance, executives may be subject to mandatory retirement ages. Some people want to retire as soon as they can, and others want to work until they drop. Don’t make assumptions.
- You can bring it up, but very carefully. If you’re working on succession planning, you can ask about retirement plans, but don’t make a joke out of it or say something like, “I guess it’s time to make way for the next generation.” Ask only if you have a legitimate need to know. If employees say they have made no plans for retirement, drop the subject. And if they express interest in retiring, don’t do anything to push them out. That could violate age-discrimination laws.
- Be ready. Make information available to employees considering retirement even if you don’t have a specific need to know. While you might think it’s best to just give the information to your older employees, remember that almost everyone will transition to retirement at some point. Prep them at every stage along the way.
- Advise employees to use health savings accounts (HSAs) wisely. HSAs can act as retirement accounts. While employees can roll over the extra funds each year (unlike flexible spending accounts), they can also squirrel away some tax-free money for retirement. If you offer a high-deductible health plan with an HSA, encourage them to use that to help save for medical expenses post-retirement. If they want to use it for something else, however, reinforce that they will have to pay taxes.
- Explain that health insurance will change. Unless you have an old-fashioned pension plan that includes health insurance for retirees, your employees will be on Medicare and private insurance when they retire. Make this clear when explaining the consequences of leaving the workforce. If they are 65 and have worked for 10 years in a job that contributed to Medicare, they should be eligible for Medicare. If not, they can apply for health insurance through a private company or through an Affordable Care Act exchange. There might be some sticker shock when applying for individual health insurance policies; after all, you have been subsidizing the total cost of insurance while they worked for your company.
What If an Employee Wants to Go Part-Time?
Not everyone wants to switch from working 50 hours a week to sitting at home all day. Some people of retirement age aren’t ready for complete retirement (either financially or emotionally) and are interested in working part-time. This can be a boon for your company: You get to keep a valued, experienced employee for longer. Before you make this offer, explain to the employee that working less than 30 hours a week will affect their eligibility for company-sponsored health insurance. Make it clear that they will be responsible for finding their own insurance, whether through private means, Medicare, the exchanges, or a spouse’s plan.
Because you don’t want to discriminate against anyone, nor do you want anyone to think you’re discriminating, tread lightly. If you think someone wants to retire or switch to part-time work, make a general announcement and be clear that if anyone is interested in planning for retirement, they can talk to the human resource department to learn about their options without it affecting their current employment.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
Suzanne Lucas spent 10 years in corporate human resources, where she interviewed and hired employees, managed the numbers, and double-checked with the lawyers. Her writings have appeared in Inc. Magazine, CBS MoneyWatch, US News, Readers Digest and other publications. She focuses on helping businesses nurture great employees and helping employees enjoy great careers.