A pivotal year for managing retiree medical benefit costs.

With Medicare set to begin offering a prescription drug benefit in 2006, employers that provide medical coverage to retirees aged 65 and older have a unique opportunity to redefine their programs and financial commitments for the long term. The new Medicare Part D drug benefit poses a range of alternatives for employers to consider--from eliminating post-65 drug benefits altogether to maintaining or modifying their current programs to qualify for the 28% federal tax subsidy for eligible drug costs. In deciding on a course of action, companies need to consider a host of complex issues, including workforce needs and demographics, employee relations, plan design and administration--in addition to the long-term financial and accounting implications. This article reviews the alternatives available to employers with the advent of Medicare Part D and highlights some of the key factors employers should consider as part of this decision.