TIAA-CREF Developing Retirement Health Care Savings Plan
TIAA-CREF today announced development of a Retirement Health Care Savings Plan, an employer-sponsored defined-contribution savings account to help individuals in the academic, research, medical and cultural fields save for medical and health-related expenses in retirement. The company discussed the plan at its 2008 Client Forum in Kissimmee, Florida.
Under the Retirement Health Care Savings Plan, which will support pre-funding arrangements via a Voluntary Employees’ Beneficiary Association (VEBA) or Section 115 trusts, employees and employers would be able to contribute dollars to the plan. Any earnings on the account, however, would not be taxed. Individuals can withdraw funds tax-free in retirement to pay for eligible out-of-pocket health care expenses, health insurance and long-term care insurance premiums.
For both plan sponsors and individuals the plan will be integrated into TIAA-CREF’s suite of retirement-related services. For plan sponsors, this includes unified administration and reporting and flexibility in providing health insurance coverage. Individuals will be able to access a unified view of all of their TIAA-CREF retirement accounts.
“This is another tool to help our institutional clients manage the rising cost of providing health insurance benefits to retired faculty and staff, and to help those individuals save more for medical costs they may expect to incur throughout the rest of their lives,” said Doug Chittenden, Vice President of Institutional Product Management. “Rising health care costs in retirement present a growing challenge for the individuals and institutions we serve. While there is no single solution, the health care savings plan we envision offers a flexible approach to helping employees set aside money for their future needs.”
TIAA-CREF is the leading retirement system for people who work in the academic, research, medical and cultural fields with more than $419 billion in combined assets under management. The company serves 3.4 million active and retired employees of more than 15,000 institutions.
According to research conducted by the Employee Benefit Research Institute (EBRI) and the TIAA-CREF Institute, a 65 year-old needs $210,000 today to cover health insurance premiums (Medicare Part B and any employment-based insurance) and out-of-pocket medical expenses to age 901. Further, annual health care spending by people aged 65 and over was nearly four times that of the rest of the population in 2004, the most recent year for which data is available, and seniors spent an average of $14,800 on health care in that year, not including the cost of long-term care2.
“Retiree health care costs represent one of the top strategic challenges confronting institutions of higher education,” added Mr. Chittenden. “Our focus is on helping our clients address this challenge as part of our mission to help meet their financial needs.”
“Providing attractive benefits, including a retiree health care savings plan, are integral to the ability to attract and retain high caliber faculty and staff, and to allow them to retire when they are ready,” said Thomas Lauman, Director of Benefits, Washington University in St. Louis. “TIAA-CREF’s track record of long-term growth, value and understanding of the higher education and non-profit community makes it the ideal organization to provide a savings vehicle to help meet health care needs in retirement and we are excited to contribute to their development efforts.”
The plan, which TIAA-CREF is developing in consultation with institutional clients, will be available beginning in 2009. Last year, the company formed a Task Force of retirement plan sponsors at institutions of higher education to offer insights into their unique retirement health care needs.
Additional information about pricing and availability will be available in early 2009.
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