RAILROAD RETIREMENT AND INSURANCE COVERAGE
The
following has been prepared for those who have either reached or are nearing
retirement age and who are trying to determine the best timing of when to start
their retirement. One of the most important (and often overlooked) costs that
could effect your retirement decision is the cost of insurance. The insurance
falls into two major categories: (1) insurance cost for you, and (2) insurance
cost for your spouse.
NOTE: If you are single then the only part of the following that will effect you will be the cost of the “supplemental” coverages that either covers or offsets the cost of insurance deductibles in the primary policy.
The scenarios below attempt to represent the most common situations that married retirees face in both “early retirement” (60/30 prior to age 65) and retiring at 65 years of age or later. Any questions, including additional information on coverage other than you and/or your spouse can be directed to United Health Insurance at (800-842-9905), option 2.
Retiring Early (Ages 60-65 w/30 yrs service)
If you have thirty years of service prior to reaching age 60 then you can
retire with full benefits on or after the age of 60. At that point you will
move from the active employment coverage (GA-23000) to the retirement
supplement coverage (GA-46000). The early retirement supplement coverage is a
limited insurance approximately equal to the 80% major medical plan we used to
have under Travelers. The lifetime maximum is very limited in the event you or
your wife has a serious illness so a supplement to that policy is recommended.
It covers most of the remaining 20% and increases the lifetime maximum dramatically.
Cost of
GA-46000 – No cost
This plan is furnished to employees and their
spouses who retire after the age of 60 but before the age of 65. It is
basically a major-medical policy that covers 80% of medical costs with a
maximum lifetime benefit of $96,400 per person. (NOTE: That amount increases to $101,200 per person on
Cost of Plan E,
Supplement to GA-46000 -- $155.00/mo per person
This plan is a supplement coverage
to the GA-46000 early retirement plan. The benefit of paying for this
out-of-pocket is that it increases the maximum lifetime coverage to $500,000.
In addition, it pays 70% of the unpaid 20% portion of the GA-46000. This
provides an approximate total coverage of 94% when you have both the GA-46000
and the Plan E Supplement. In filing claims the GA-46000 will be the primary
policy with the Plan E coverage filling in when the primary coverage is either
exceeded or exhausted.
What does this mean to me in dollars?
Retirement insurance costs most severely impact those employees who are older than their spouses. Whether they wait until they reach the age of 65 to retire, or retire early under the 60/30 option, they will be faced with increased insurance costs for younger spouses. At 65 the retired employee must move to Medicare coverage (shown below). The employee must then pay COBRA payments for their spouse until they too reach the age of 65. Those payments are both expensive and limited to a maximum of 36 months. If your spouse is more than three years younger than you the option of covering him/her will end 36 months after you reach the age of 65, after which you will be forced to leave the spouse without insurance coverage or purchase a policy from another source.
Please note the following scenarios to help you understand the coverage costs of early retirement:
Example No. 1 – Employee is married and under the age of 65:
GA-46000 – no cost to either employee or spouse.
Plan E (employee) $155.00
Plan E (spouse) 155.00
Total
monthly cost: $310.00
until employee reaches age 65.
Example No. 2 – Employee is 65, and older than spouse but within 36 months in age:
Costs up until time employee reaches age 65 are the same as above. Once the employee moves under Medicare coverage the insurance coverage changes:
GA-46000 COBRA (spouse) $642.76
Plan E (spouse) 155.00
Spouse Subtotal: $797.76
Employee (Medicare supplement) 172.00 (prescription coverage is extra)
Total
monthly cost: $969.76
until spouse reaches age 65.
Example No. 3 – Spouse is more
than 3 years younger than employee:
Costs are the same as in Example No. 2 but spouse’s coverage will end after the expiration of 36 months under COBRA coverage. Following that date, coverage will have to be found with a third-party carrier to cover the spouse until Medicare age of 65.
NOTE: Dental and Vision coverages
for retirees and their spouses are limited to a maximum of 18 months
under any of the above retirement scenarios that do not pertain to
Medicare and are paid in addition to all other coverage options. They
are per person as follows:
Dental $24.80 per person
Vision $ 5.30 per person
Retiring At Age 65 (or later)
The employee that works until they
have reached the age of 65 then retires will immediately move from the group
insurance for active employees, Plan GA-23000, to Medicare coverage.
Considering the previous information for employees faced with the costly COBRA
payments for their younger spouse, some employees will elect to work beyond age
65 until their spouse also reaches age 65 to eliminate the need for the
expensive interim coverage. The employee would remain under the GA-23000 until
retiring in that scenario, as would their spouse/family, and both would move
directly to Medicare coverage upon retirement at spouse’s age 65.
A Word about
Medicare:
Medicare is, of course, managed and
paid for by the Federal government and financed by tax dollars. The coverage
falls into a two major categories: Medicare A (primarily hospital costs) and
Medicare B (doctors, lab tests, etc.). Everyone does not have Medicare A but retiring railroad employees should in almost all
cases. Registration is necessary for everyone.
Medicare covers 80% of whatever care
you require. It also has an out-of-pocket deductible that varies year to year which
is around $150-$200. A relatively inexpensive supplement is available through
United Health called Plan F. This no longer includes prescription coverage (see
note below) which is available through many companies under the Federal
prescription plan. Plan F pays all of the out-of-pocket costs for Medicare and
the remaining 20%of coverage not provided by Medicare, which amounts to 100%
coverage. Medicare patients must visit physicians who accept them under
Medicare which pays a flat rate. Some doctors do not accept Medicare so you may
need to change physicians once you retire.
For the employee that works until
age 65 and who has a younger spouse the COBRA payments for continuing coverage
are somewhat less than that for early retirees. The 36 month limit allowed for
COBRA payments remains but the costs are as follows:
Example No. 1A – Employee
goes under Medicare but pays COBRA for younger spouse:
Employee Medicare Supplement (Plan F) $172.00
Spouse COBRA for GA-23000
523.60 (see Dental/Vision above)
Total monthly cost: $695.60 until
spouse reaches 65
The
next example can be considered the “optimum” scenario as far as insurance cost
where an employee and the spouse have both reached the age of 65.
Example No. 1M – Employee and Spouse are both age 65
or older and under Medicare:
Employee
Medicare Supplement (Plan F) $172.00
Spouse
Medicare Supplement (Plan F) 172.00
Total
monthly cost: $348.00
AN IMPORTANT POINT ABOUT PRESCRIPTIONS & RETIRING UNDER MEDICARE:
United Health
Care, as all other group coverages, no longer offers Plan D prescription
coverage for retirees under Medicare. That coverage is available from a
variety of companies offering a range of different protection for widely
different costs. United Health Care works with AARP to furnish that care. More
information can be obtained at the following Internet link: Learn more at
AARPMedicareRx.com