The Impact of the Erosion of Retiree Health Benefits on

• The percentage of private-sector employers offering health benefits to retirees has been declining in the United States for many years. In 2002, 13 percent of private-sector employers offered retiree health benefits to early retirees (pre-65), down from 22 percent in 1997. Similarly, in 2002, 13 percent of private-sector employers offered retiree health benefits to Medicare-eligible retirees (age 65 or older), down from 20 percent in 1997. • Reasons for the Decline: The Financial Accounting Standards Board triggered most of the changes that private-sector employers have made to retiree health benefits when in 1990 it approved Financial Accounting Statement No. 106 (FAS 106). FAS 106 requires companies to record retiree health benefit liabilities on their financial statements in accordance with generally accepted accounting principles. With the new view of the cost, and the increasing cost of providing retiree health benefits in general, many private-sector employers began to overhaul their retiree health benefit programs in ways that controlled, reduced, or eliminated their costs. Today, the public sector faces similar accounting standards and similar cost pressures. • State and Local Governments: The percentage of local governments offering retiree health benefits has declined, while the percentage of state governments offering it has increased