Many public sector workers fear their retirement will not include the employer-sponsored health care benefits they were promised

These retiree health care benefits were the top reason they chose to work in the public sector

Roughly half of public sector workers surveyed (46%) are worried that the health care benefits they were promised in retirement will evaporate when they need them most. This is according to the 2020 Keeping Benefit Promises Study by Willis Towers Watson, a leading global advisory, broking and solutions company. Public sector workers also expressed the importance of retiree health care coverage, with 58% saying it was extremely or highly influential in their decision to work in the public sector.

Many public sector workers acknowledged they likely earn less in base pay and bonuses than their private sector counterparts but expect their employers to make up this difference by offering robust benefits in retirement. “What public sector workers give up in salary, they make up in benefits,” said Jon Andrews, managing director, Benefits Delivery and Administration, Willis Towers Watson. “As costs climb and budgets are cut, public sector retiree health care benefits are increasingly at risk of disappearing. But slashing these benefits could have a catastrophic effect on our communities’ ability to attract top talent to teach our children and keep our towns safe.”

Almost two-thirds (64%) of public sector workers said their financial security in retirement depends on the promise of employer-sponsored health care coverage. However, retiree health care is becoming an unsustainable financial burden on public sector organizations, with state unfunded retiree health care liabilities nationwide reaching $700 billion.1 Many cities are reacting by cutting retiree health care altogether or adopting short-term solutions, such as reducing spousal benefits or requiring more years of service to qualify.

“When balancing their budgets, public sector organizations are stuck between a rock and a hard place,” said Andrews. “They do not want to increase taxpayer burden nor deprive employees of the benefits that initially attracted them to the job. The good news is a solution exists. Employers should consider an often-overlooked remedy: providing funding via a health reimbursement arrangement and allowing retirees to shop for health plans (with these funds) on the individual Medicare marketplace.”

Notably, 41% of public sector workers said they would give notice if their benefits were reduced, and more than half (54%) expect to be supported in retirement because they served their community. “Public sector workers are the strongest thread in the fabric of our communities. We need to honor the benefits they were promised in retirement, especially when there’s a viable, cost-saving solution,” said Andrews.

About the survey

The Willis Towers Watson 2020 Keeping Benefit Promises Study was conducted online from November 6 through November 13, 2019. A total of 1,522 public sector employees and retirees participated.

1 Liz Farmer, “As Retiree Health-Care Costs Soar, Public Employers Turn to Private Insurers,” Governing, January 9, 2019, https://www.governing.com/topics/finance/gov-retiree-health-care- costs-soar-government-solutions.html