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Troubleshooter: Can benefits be rescinded?

Jan. 3, 2023
This dental hygienist is concerned about the dentist soon qualifying for Medicare. If and when he does, is he obligated to continue medical benefits for employees?

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Question: I read an article on punishing an employee by taking away a bonus that made me think of a similar question. I am the lone hygienist in a single-doctor practice. I currently have the benefit of the doctor paying half the cost of my medical insurance and matching my 401k (up to 3%). The doctor fears he may not be able to continue to afford this. He turns 65 soon and will then have Medicare. Is he allowed to rescind current benefits and if so, what would be fair compensation in lieu of those benefits? I fear I may already know the answer.

Answer from Rebecca Boartfield of Bent Ericksen & Associates:

I can understand your concern, and unfortunately, I do not have good news. 

Unless the employer is required to provide a benefit by law, it can be rescinded anytime. In this case, both medical insurance (for employers with fewer than 50 employees) and 401(k) contributions are what's called "discretionary benefits," meaning they’re not required by law; therefore, should your employer decide to rescind those benefits to you, it is legal to do so. 

In terms of fair compensation in lieu of those benefits, providing additional compensation after these benefits are removed is also not required by law. Your compensation could remain the same, or it could be increased, and that would depend on what your employer wants to do. If it's increased to account for the loss of these benefits, the amount of the increase is your employer's choice.

Sometimes the cost of the benefits being removed are calculated down to an hourly rate, which is then amount of a raise. For example, if your employer is paying $200 a month for insurance, that's roughly $1.15 per hour if you work 2,080 hours per year. (This is full-time employment at 40 hours a week for 52 weeks.) While this might be the fairest approach, and certainly one that is perhaps better for morale, the employer can choose a different amount altogether that could even be less than the equivalent of the benefits you were being provided.  

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