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Why Employers Are Making Workers Get Money-Smart

Over the past several decades, there's been a massive shift in the relationship between employers and employees. Rather than providing extensive benefits that leave the responsibility of figuring out how to cover costs squarely on employers' shoulders, companies have sought ways to give their employees the ultimate decision-making authority on important financial matters that will affect them during their careers and beyond.

Taking charge of your health
The latest round of corporate moves to shed responsibility for employees' financial concerns involves retiree health insurance coverage. IBM (NYSE: IBM  ) announced earlier this week that it will replace its company-sponsored health-plan coverage for 110,000 retired workers, instead paying retirees directly to buy their own coverage on health insurance exchanges. In IBM's case, retirees eligible for Medicare will have access to plans from Towers Watson's (UNKNOWN: TW.DL  ) Extend Health exchange.

IBM is far from the only company making similar moves. Caterpillar  (NYSE: CAT  ) has been a client of the Extend Health service since 2009, while DuPont  (NYSE: DD  ) signed up at the beginning of the year. Under the Caterpillar program, retirees got $3,000 in health reimbursement accounts to offset the cost of supplemental Medicare plans, with any excess rolling over to future years. With more than 9,000 former workers eligible, Caterpillar believed the $27 million investment was worth making and would be cost-neutral or beneficial to most participants. DuPont's arrangement is similar, with those with single coverage getting up to $1,400 from DuPont and couples getting $2,800 in an HRA to go toward health insurance premiums or health care costs. Towers Watson believes this trend will continue as companies decide that the best way to avoid closing plans entirely and continuing to offer insurance options to retirees will be through health exchanges like Extend Health.

The imminent establishment of health insurance exchanges under Obamacare could also contribute to the trend. So far, most companies have only changed coverage for those eligible for Medicare. For instance, last year General Electric (NYSE: GE  ) chose to end eligibility for its retiree health plans as of the beginning of 2015. But the move only affected the company's post-age-65 medical coverage, with provisions to retain coverage for younger retirees and family members. With new Obamacare policy options available, however, companies might change their decision-making processes to make younger retirees go to exchanges for their coverage going forward.

The ongoing trend
Predictably, current and former employees have been critical of company moves to shift benefits, showing skepticism that the changes leave them no worse, or even better off, than before. Fool contributor Sean Williams notes that by giving retirees money to obtain their own insurance, companies let their former workers make their own choices about how much to spend and how comprehensive a policy to obtain. In some cases, that will lead to savings that leave retirees ahead in the bargain.

But health insurance is far from the only way in which companies have shifted the responsibility for providing not only financial support for benefits, but also structural support. IBM and other companies that have embraced farming out health insurance have also shifted from traditional pension plans to defined-contribution retirement support through 401(k) plans. By doing so, employers take themselves off the hook to find ways to save enough and invest well enough to produce pension payments for employees, instead letting employees make their own investment decisions.

Even in health care, other company initiatives have addressed rising costs. Perks like flexible spending plans and health savings accounts have allowed employees to play a more active role in their health care decisions, putting more of their own money at risk and giving them a greater incentive to be cost-conscious about their care. In many cases, that has been good for both employers and employees.

The inevitable shift
Admittedly, companies' moves to reduce their responsibility for benefits aren't good for everyone. But even for those negatively affected, the inexorable decay of what amounts to employer-provided financial planning makes it more important than ever to take control of your own finances and to make the most of the tools that your employer gives you through benefits. If you put in the effort, you'll increase your odds of ending up better off in the bargain.

Like many of its provisions, Obamacare's impact on retiree health benefits is still unclear. If you want to get a better handle on how Obamacare will affect you and your portfolio, take a look at The Motley Fool's special report, "Everything You Need to Know About Obamacare." Inside, we'll give you a 360-degree look at how the law may impact your taxes, health insurance, and investments. Click here to grab your free copy today.

Tune in to for Dan's regular columns on retirement, investing, and personal finance. You can follow him on Twitter @DanCaplinger.

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