Magazine article The CPA Journal

AARP Reports FASB Statement Is Reason for Reduction in Health Care Benefits to Retirees

Magazine article The CPA Journal

AARP Reports FASB Statement Is Reason for Reduction in Health Care Benefits to Retirees

Article excerpt

The March 1991 Bulletin of the American Association of Retired Persons reported actions taken by various companies in response to rising health care costs for retirees and SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires that companies accrue for such costs over the period of active employment. The AARP newsletter reported that 400 retirees of First Bancorp of Texas in late 1990 were informed that beginning in 1991 they would no longer be covered by First City's health insurance plan and that First City cited the new accounting rule as the key reason for cutting off benefits. Complying with the rule, said First City, would force it to reflect "future unfunded liabilities between $15 million and $26 million."

Ball Corporation, an Indiana-based manufacturer, no longer offers health benefits to those retiring who were hired after January 1, 1990. Instead, it offers a health insurance savings plan that invests money in the form of an annuity. …

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