Retiree Health Benefits as Deferred Compensation: Evidence from the Health and Retirement Study

James Marton and Stephen Woodbury

No 12-182, Upjohn Working Papers from W.E. Upjohn Institute for Employment Research

Abstract: Are early retiree health benefits (RHBs) a form of deferred compensation that binds workers to an employer? Most employers who offer RHBs offer them only to workers who have 10 or more years of tenure with the firm and have reached age 55. Accordingly, workers in firms offering RHBs have an incentive to stay with a firm in the years before they attain eligibility for RHBs, and a greater incentive than otherwise to retire thereafter. We test for the existence of such a pattern of incentives by examining the age-specific relationship between workers’ eligibility for RHBs and retirement. The findings suggest that workers in RHB-offering firms are less likely to retire at ages 50 and 51 than similar workers in firms that do not offer RHBs. Also, RHB-eligible workers aged 60 and 61 are more likely to retire than similar RHB-ineligible workers. Such a pattern is consistent with RHBs acting as part of a delayed-payment contract of the kind described by Lazear (1979, 1981).

Keywords: Tax Subsidies; Health Insurance; Retirement; Employee Benefits; Deferred Compensation; Compensation Methods (search for similar items in EconPapers)
JEL-codes: H25 I18 J26 J32 M52 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-age, nep-hea, nep-ias, nep-lab and nep-lma
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Related works:
Journal Article: Retiree Health Benefits as Deferred Compensation (2013)
Working Paper: The Influence of Retiree Health Benefits on Retirement Patterns (2010)
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