How big is your past service liability? Read this Milliman client’s discovery.

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This employer is paying slightly more than $300,000 each year for its retirees and dependents.

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The annual claims cost is dwarfed by the liability for future benefits for the same retirees and dependents—more than $2.2 million.

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The final piece is the past service liability for active employees—more than $5.5 million. And this isn’t the whole liability for medical benefits that will be paid to future retirees—it’s just the portion of the liability that is attributed to past years of service.

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If the employer does not prefund these benefits, the liability grows by another $11 million because future investment income will not be available to help pay for the benefits. The total liability is almost $20 million.

Conclusion

Milliman prepared an interactive model to help the client dynamically explore possible plan design options to reduce its liability.