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How ICHRAs Can Help Prevent Brain Drain and Retain Retirees

How ICHRAs Can Help Prevent Brain Drain and Retain Retirees
Posted on Tuesday, August 20, 2019 by Marcy Klipfel
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Employers may scratch their heads when it comes to end-of-career workforce management, for good reason.

ICHRA-and-retirees-

We’re experiencing a retirement boom that’s creating a considerable knowledge drain on many organizations. People with significant experience and intellectual capital are ditching the workforce in droves, even before normal retirement age, leaving employers with a shrinking workforce and a considerable loss in industry knowledge.

It’s no secret that Baby Boomers are aging out of the workforce. An estimated 10,000 people turn 65 each day. However, the current average retirement age is 62, so most people retire at least a few years early.

So, how can employers hang on to employees who may want to retire before the organization is ready for them to call it quits? And, bonus question: How do employers potentially attract young retirees from other organizations who can hit the ground running in their organization?

In a word, benefits.

One of the things people often lose when they retire before age 65 is their healthcare benefits. They can elect COBRA for some period, or they can seek coverage on a public exchange. However, both can be expensive options, and that can be an important consideration for someone on, or about to be on, a fixed income.

This is where the newly minted Individual Coverage Health Care Arrangements (ICHRAs) can provide a powerful lever to use with young retirees you want working for you.

For employees you want to retain

Retirement is generally considered an all-or-nothing proposition. One day your valuable employee is there; the next day they’re gone, taking with them lots of experience and perspective. But, what if you could entice them to stay on part-time, effectively transitioning to retirement?

According to Forbes, a study by the U.S. Government Accountability Office found four specific advantages to phased retirement for an employer: retaining experienced, highly skilled workers, enabling the transfer of knowledge to younger employees, helping transition older employees and better workforce planning.

Phased retirement (or part-time work) provides a paycheck, but it often doesn’t offer benefits once the employee dips under your eligibility threshold. However, with an ICHRA, the employer can fund part or all of a phased retiree’s healthcare coverage, regardless of the number of hours they work. This could be a very powerful inducement for someone not yet eligible for Medicare to stay on a part-time basis instead of leaving entirely.

For retirees you want to attract

With the average retirement age around 62, there are plenty of highly experienced, highly skilled people considering or engaged in part-time work. If you’re thinking about tapping into this segment of the workforce, you’re not alone.  Other employers are already beginning to focus on young retirees. And, with a tight labor market, that means if you offer something other potential employers don’t—like an ICHRA to fund healthcare coverage for pre-65 retirees—you have a competitive advantage in attracting these workers.

A note on ICHRAs and state individual mandates

Several states have already enacted state-level individual mandates, and others are developing similar legislation. Employers in these states may find it harder to recruit and retain part-time employees who have no access to benefits, since these people may face a financial penalty for not having coverage. An employer that offers any level of benefits could be much more attractive than one that doesn’t, especially when young retirees may be operating in a “seller’s market.”

ICHRAs are a new tool that employers can begin using to offer healthcare benefits strategically. One area where there is significant potential is with young retirees. For employers faced with the likelihood that retirements will mean the loss of important resources and for those looking to fill spots with part-time, seasoned talent, offering healthcare benefits in the form of an ICHRA could be something to seriously consider.

Register for our upcoming webinar to learn more about how you can create a seamless benefits experience for your employees.