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Retiree Health Benefits as Deferred Compensation


  • James Marton
  • Stephen A. Woodbury


Are early retiree health benefits (RHBs) a form of deferred compensation binding workers to an employer? Most employers who offer RHBs offer them only to workers who have ten or more years of tenure and have reached age fifty-five. 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. The authors test for 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 fifty and fifty-one than similar RHB-ineligible workers. Also, RHB-eligible workers aged sixty and sixty-one are more likely to retire than similar RHB-ineligible workers. These results are consistent with RHBs acting as part of a delayed payment contract of the kind described by Lazear.

Suggested Citation

  • James Marton & Stephen A. Woodbury, 2013. "Retiree Health Benefits as Deferred Compensation," Public Finance Review, , vol. 41(1), pages 64-91, January.
  • Handle: RePEc:sae:pubfin:v:41:y:2013:i:1:p:64-91

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    References listed on IDEAS

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    Cited by:

    1. Shoven, John B. & Slavov, Sita Nataraj, 2014. "The role of retiree health insurance in the early retirement of public sector employees," Journal of Health Economics, Elsevier, vol. 38(C), pages 99-108.
    2. Joshua Congdon-Hohman, 2014. "Retirement Reversals and Health Insurance: the Potential Impact of the Affordable Care Act," Working Papers 1501, College of the Holy Cross, Department of Economics.
    3. Fitzpatrick, Maria D., 2014. "Retiree health insurance for public school employees: Does it affect retirement?," Journal of Health Economics, Elsevier, vol. 38(C), pages 88-98.
    4. Nyce, Steven & Schieber, Sylvester J. & Shoven, John B. & Slavov, Sita Nataraj & Wise, David A., 2013. "Does retiree health insurance encourage early retirement?," Journal of Public Economics, Elsevier, vol. 104(C), pages 40-51.

    More about this item


    compensation methods; deferred compensation; employee benefits; health insurance; retirement; tax subsidies;

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance


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