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WASHINGTON – Skyrocketing medical costs and public policy may leave future retirees shouldering more -if not all- of their health benefits costs. According to a recent Watson Wyatt Worldwide study Retiree Health Benefits: Time to Resuscitate?, employer financial support will shrink to less than 10% of total retiree medical expense by the year 2031 compared to the 50% paid by large companies today. Many employers have already reduced or eliminated retiree health benefits and Watson Wyatt research shows that the trend will only accelerate as health care costs climb. The study also finds that 20% of the employers studied have eliminated retiree medical plans for new hires altogether and 17% will require new hires to pay the full premium for coverage. Other findings include the following: * Employers are imposing stricter minimum service requirements for future retirees. For example in 1984, nine out of 10 large employers that offered retiree medical benefits to workers over 65 required five or fewer years of service. In 2001, only about one-quarter of employers offered benefits to workers retiring with five or fewer years of service. For future retirees, only 14% allow workers to qualify for benefits so quickly. * More employers are linking contributions to the retiree’s length of service For current post-65 retirees, only 32% had adopted service-related contributions, but 72% of employers do so for future retirees. * Reduction in average employer premium contributions from 80%for current retirees to 60% for future retirees. * Employers are capping their contributions toward annual retiree medical premiums. About 45% of employers cap contributions for new hires while 39% do so for current employees. Only one in four employers cap contributions for current retirees. The median employer contribution cap of $2,000 for current post-65 retirees drops to $1,740 for future retirees; the median of $4,450 for current pre-65 retirees drops to $3,900 for future retirees.

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