Fidelity Investments and Aetna announced a new program Tuesday in which employees at a consortium of colleges will have the chance to create special retirement accounts to pay for health care.
The Emeriti Program will be open to employees at the members of Emeriti Retirement Health Solutions, a consortium of colleges that aims for more clout in negotiating with benefits companies by combining the employees of their institutions. Most of the 29 members are private liberal arts colleges, although scores of other institutions are considering joining, and membership will not be restricted to certain types of colleges.
Under the program, employers and employees could make voluntary contributions to special accounts with the employer contributions not taxed. The funds are then invested, and upon retirement, employees can select among several insurance plans to supplement their Medicare coverage. Besides paying for the supplemental coverage, the accounts can also be used to pay for some out-of-pocket medical expenses not covered by either Medicare or the additional health insurance.
The sponsors of the new program -- which they say is the only one of its kind -- say that they based it on research by the Andrew W. Mellon Foundation that found that many faculty members are worried about paying for post-retirement health care, and that faculty members whose institutions have generous post-retirement health benefits retire earlier than those at other institutions.
Barbara Perry, vice president for marketing at Emeriti, said that the program was a "strategic benefit" that colleges would find valuable in recruiting and retaining faculty talent. She said that the specifics of each program -- such as contribution sizes -- would be determined at the campus level.
"Once you join the program as a college, you adapt it for your institution," she said. Perry added that while Emeriti was started with an emphasis on liberal arts colleges, she did not see any reason that the benefit would be less attractive at other institutions. "This is a universal issue and institutions of all sizes are expressing interest."
Andy Brantley, incoming chief executive officer of the College and University Professional Association for Human Resources, called Emeriti "an interesting concept" because many colleges either can't afford to pay for retiree health insurance or worry about the rising costs of such benefits. An approach like Emeriti "changes the dynamic" in that the college makes a contribution, but isn't forced to pay unknown costs at some point down the road when insurance costs skyrocket, he said. As a result, he said, some colleges that do nothing on health benefits for retirees may find it viable to do something.
A spokeswoman for TIAA-CREF said that the issue of retiree health care costs was "one of a number we are looking at," but that "we are more focused on the retirement savings side of the business."