Anatomy of a long-term care rate increase
This paper provides guidance for insurers on how to prepare clean, efficient rate increase filings and to help carriers work with regulators to incorporate the information they seek.
Healthcare and other essential businesses are in a unique situation due to the COVID-19 pandemic. While many other non-essential businesses are closing temporarily due to government requirements, even leading to staff layoffs in some cases, essential employers in some regions are experiencing the need to increase staffing levels or putting plans in place to do so in the coming weeks or months. In healthcare, a likely source of trained and experienced professionals who could assist, and in some states are being recruited to do so, are former employees who are currently retired.
In order to rehire these employees, plan sponsors may need to remove a roadblock that is common in many pension plans – specifically, the plan’s requirement to suspend a retiree’s monthly benefits if they are rehired by the employer. Retirees may be less likely to return if they are concerned about this loss of income. Amending the plan to remove or modify this provision for those rehired during the crisis could make the road to re-employment smoother for these retirees. Plan sponsors should consider:
Another pension consideration that plan sponsors in essential businesses may encounter is with respect to plan compensation. Pension plans have specific definitions of compensation that are used for purposes of calculating a participant’s pension benefits. These definitions can include or exclude compensation categories such as overtime, shift differentials, and incentive pay and bonuses, to name a few. Essential employers may want to consider whether extraordinary pay categories received due to the crisis will be pension eligible, even if these categories have traditionally been excluded. Effects on pension benefits and plan costs should be considered and analyzed. Recordkeeping and payroll systems may need modification to properly categorize this compensation as pensionable or non-pensionable.
The final item that essential employers may want to review is the ability for employees to access pension benefits while still employed. Under the recently passed SECURE Act, plan sponsors can allow participants who are 59 ½ or older to take distributions from their defined benefit plan while still employed. Although essential employers in healthcare may have a high demand for workers in many positions, there are likely other positions where workers have experienced fewer hours due to the reduction of voluntary and elective healthcare procedures and services. Employees in these positions may welcome the ability to access their pension benefits without the requirement to terminate employment.
These plan design considerations should be carefully reviewed by the employer and plan sponsor in conjunction with their advisers with respect to their specific employee population, staffing needs, and ability to modify the pension plan to address the issues raised by this pandemic. For more details, please contact your Milliman consultant.
Impact of COVID-19 on your pension plan: Rehiring retirees in healthcare and other essential businesses
While many non-essential businesses are closing temporarily due to government requirements, even leading to staff layoffs in some cases, essential employers in some regions are experiencing the need to increase staffing levels or putting plans in place to do so in the coming weeks or months.