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Investment giant Vanguard walked back a decision this week to cut its retiree medical benefit program, which helps pay for healthcare costs in retirement, after an outcry from current and past employees.
The benefits in question are retiree medical accounts, also known as RMAs, which are investment accounts that allow individuals to pay for health insurance premiums. Vanguard, which had already stopped offering these benefits to new employees, terminated the program effective immediately on Monday, but changed its mind after workers said it was too sudden, according to a report in the Philadelphia Inquirer.
“We sincerely apologize for the abrupt timing of the announcement and have decided to recalibrate our approach in light of important feedback from crew and retirees,” the company said in a statement. “The Retiree Medical Account (“RMA”) benefit will remain in place until the our benefits team develops an alternate approach for crew and retirees. While Vanguard has determined that changes to the existing RMA benefit are needed, we recognize that crew and retirees have varying needs and require more time to plan for the implications of this change.”
Vanguard funded the RMAs with $5,500 each year an employee worked, with at least $2,500 more for spouses, the Philadelphia Inquirer reported. In retirement, the company contributed another $1,500 per couple each year. According to the original letter Vanguard sent its workers and retirees, which the Philadelphia Inquirer shared, claims to their RMAs had to be postmarked by Dec. 31 but expenses incurred after Oct. 31 would not be allowed for reimbursement.
Healthcare costs are one of retirees’ biggest budget lines, and it only gets more expensive as a person ages. The average couple retiring at age 65 can expect to spend $300,000 alone in healthcare in retirement, which does not include long-term care needs. But every individual’s health needs are different — some people retire before 65, when they don’t yet qualify for Medicare. Others may require more expensive procedures and medications to combat serious illnesses.
Aside from retirement-specific accounts, such as 401(k) plans and individual retirement accounts, workers can use programs such as RMAs and health savings accounts (or HSAs) to fund these healthcare costs. HSAs are tied to high-deductible health plans, which may be unaffordable for some families because of the high deductibles they’d have to pay before insurance kicks in.
