Key takeaways
While retiree benefits in the private sector have declined significantly over the past 30 years, public-sector employers offer retiree benefits at a higher rate.
Lockton’s data points to service-based contributions and Medicare eligibility as cost-management strategies used across Texas.
Employer contributions tend to decline after Medicare eligibility, with public-sector employers using a mix of Medicare Advantage and supplemental benefits to support post-65 retirees.
Against a backdrop of declining retiree health benefits among private-sector employers, recent research indicates that public-sector employers continue to offer retiree coverage. In 2024, nearly every state, including Washington D.C., provided some health benefits to Medicare-age state retirees, according to data from KFF’s Employer Health Benefits Survey (opens a new window). On the flip side, data from the same survey showed an overall dip in retiree benefit offerings among large private employers, from 29% to 21% in two years. This follows a 66% drop over the course of nearly 40 years.
Findings from Lockton’s Public Sector Practice, which surveyed public employers in Texas, support this trend: 90% of respondents reported offering pre-65 medical coverage, with about half offering post-65 coverage or subsidies. While the survey does not represent all public-sector employers, the findings suggest that many participating organizations continue to view retiree medical benefits as an important part of their overall benefits strategy.
Medicare eligibility remains the dividing line in employer commitment
According to Lockton’s findings, while 61% of employers contribute to pre-65 medical coverage, only 40% contribute after Medicare eligibility (post-65). Among those that offer post-65 coverage, offerings are about evenly split between Medicare Advantage and other supplemental benefits.
This split between pre-65 and post-65 coverage reflects a broader public-sector market that has not yet converged on one post-65 solution and suggests that public-sector employers are still prioritizing retiree support but are using more targeted strategies to manage costs.
Employer support increasingly depends on service-based contribution structures
In Lockton’s data, three-quarters of respondents linked retiree health benefit contributions and support to years of service, a strategy that has helped public employers keep benefit offerings sustainable. Basing support on years of service reduces not only the number of employees that are covered but also the amount of support provided to some retirees, allowing employers to manage costs while preserving benefits for longer-tenured public employees.
Among Lockton’s respondents, most required at least 10 years of service to subsidize benefits, with a tiered system that increased the subsidy with each additional five years of service. Although service-based retiree medical subsidies are not new, their prevalence among participating respondents illustrates how public employers can preserve retiree support while targeting resources and defining their financial commitments.
Note: These results reflect 40 participating public-sector organizations and are intended to provide directional peer insight rather than a nationally representative benchmark. External research provides broader context, but differences in employer type, population, and survey definitions limit direct comparisons.