Vanguard first cuts health benefits for retirees and older workers, then changes course
Apologizing for the “brutal stalling,” investment giant Vanguard turned the tide on Tuesday and reinstated a popular medical benefit that was terminated a day earlier, angering current and past employees who depend on it. benefit to cover health care costs.
The Malvern, Pa., Investment firm initially said the retiree medical account benefit would be phased out as of Monday, October 4, but then changed its decision on Tuesday, citing employee comments, and extended the program. It is not known how long it will be extended.
“We sincerely apologize for the abrupt timing of yesterday’s announcement and have decided to recalibrate our approach in light of the important feedback from the crew and retirees,” the company said on Tuesday in an internal statement which also been sent to The inspector. Vanguard announced the decision to reinstate benefit hours after a Applicant Tuesday’s online article first reported an outcry from employees in response to the loss of the program.
The Retiree Medical Account benefit “will remain in place until our benefits team develops an alternative approach for the crew and retirees. While Vanguard has determined that changes to the existing RMA service are necessary, we recognize that crews and retirees have varied needs and need more time to plan for the implications of this change. “
Retiree medical accounts, also known as RMAs, were funded by the company to cover the cost of health premiums. They have already been removed for new employees, according to people who worked at Vanguard.
But retired employees who worked for decades at the low-cost investment firm said they felt betrayed, fearing that they would lose hundreds of thousands of dollars they had accumulated over the course of their careers.
On Monday, Vanguard sent an email and letter stating that the Retiree Medical Account program was immediately disbanded. The note was signed by Lauren Valente, Human Resources Manager at Vanguard.
Depending on the copies of the service contracts, Vanguard can terminate the RMA program at will. But employees said they didn’t expect the company to completely and suddenly remove RMAs.
“I worked at Vanguard for 35 years, and as a result of that I accumulated about $ 150,000 in tax-free funds” that Vanguard put into the account, said Greg Wynn, a now elderly Coatesville resident. 59 years old, before Vanguard changed his mind. “This money was available to pay for health care until I became eligible for Medicare.”
The same-day notice seemed insensitive to some employees.
“It’s like your wife is texting you divorced,” said Thomas Martin, a Vanguard retiree who lives in The Villages, Florida.
On Tuesday, however, Vanguard changed his mind and said RMAs would be extended. It is not known how long the advantage will remain.
RMAs are funded by Vanguard with $ 5,500 for each year of service. An additional amount of $ 2,500 or more was deposited annually for a spouse. Then, each year after retirement, the company deposited an additional $ 1,500 per couple.
The company has not released figures on the number of employees and retirees affected.
“At a minimum, they should be paid [of] account balances, ”said Lisette Lux, of County Chester who worked at Vanguard for 19 years until March 2020.
“People relied on this money, even though we were told it could disappear at any time. We never dreamed it would go away. It’s just cruel.
The late founder of Vanguard, John Bogle, she added, “must be turning in his grave.”
Retirees use the money to help pay up to 75% of health insurance premiums. In some cases, the RMA represented up to $ 300,000 that would be available to cover health care premiums in retirement.
According to legal parlance, Vanguard can terminate the RMA program at any time.
It’s unclear why Vanguard CEO Mortimer “Tim” Buckley and the board wanted to make the switch at this time. The company, known for its low-cost products, has come under pressure to cut costs in order to keep up with its competitors and maintain growth. In mid-2020, the company sent 1,300 employees to work for India-based Infosys to support Vanguard’s pension plan record keeping business.
The company had reached $ 8 trillion in assets as of June 30, double what it had in 2016.
Robert Beichner is a retiree from Vanguard, currently working as Director of Economic Development for the New Castle County Chamber of Commerce in Wilmington, Delaware. He worked at Vanguard from 1997 to 2019.
“I just lost about $ 160,000 in accrued medical retirement benefits for myself and my spouse,” said the former senior sales executive.
“I am injured, but others are just crushed,” he said. Many employees with much lower wages were entitled to the same accrued benefits.
“This is a big part of their retirement program. If you work in a call center and earn minimum wage, that money would far exceed your 401 (k) balance. It allowed people to stay and allowed people to retire, who otherwise might not have retired. “