Vanguard to phase out the popular RMA benefit

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Malvern-based Vanguard will change a popular medical benefit for retirees and employees, instead of removing it entirely as announced in October, according to a letter from the mutual fund company.

Current retirees and those who will retire by the end of next year will keep their generous Retiree Medical Accounts (RMA), everything remains the same. Retirees will continue to receive the annual funding of $ 1,000 upon retirement, plus $ 500 if they have a spouse.

Vanguard employees who were hired before 2020 and who turn 40 next year or more will retain any benefits they earned when the plan is frozen. Anyone hired since the start of 2020 is not eligible for the benefit, which granted active employees a credit of $ 5,500 for each year of employment.

“This is a huge improvement over removing RMAs,” said Ann Kavanaugh, a financial planner at IValue Financial Planning in Wyomissing, PA, and retired Vanguard financial advisor.

“At least the people who were already accumulating money in that unfunded account will benefit from it. I can promise you that there are employees who take into account their ability to withdraw this RMA. It keeps them there at Vanguard, ”she said.

The company’s abrupt decision in October to end the benefit sent shock waves through the Vanguard retiree community. The cuts came at a time when Vanguard is under pressure to improve customer service and continue to set the tone for low-cost investments.

Vanguard chief executive Mortimer “Tim” Buckley said in October the company “got it wrong” by shutting down popular retiree medical accounts with just one day’s notice. Within a week, Vanguard reversed its decision, saying it would come up with a permanent solution, which it shared with employees and retirees in a November 15 letter.

Vanguard, which has $ 8.4 trillion in assets and employs approximately 14,000 people worldwide, did not say how many employees and retirees have accounts or how much they have accumulated.

Vanguard’s salary is considered lower than most in the financial industry, but with generous benefits. Retiree medical accounts were a substantial benefit that made up for lower wages, current and former workers said.

Details of the changes are available on the external Vanguard employee website: CrewConnect.Vanguard.com.

This story was corrected on December 8, 2021 to say that the benefits for current retirees and those who will retire by the end of 2022 have not changed.

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