The recent elimination of mandatory retirement in Ontario has prompted some (but not all) organizations with Ontario-based employees to consider the benefits they will extend to workers who stay on the job past age 65. However, a short poll taken a scant two weeks before the Ontario legislative changes came into effect on Dec. 12, 2006, indicates a lack of consensus on certain coverage for post-65 workers.
A Hewitt survey conducted in November asked employers to indicate their plans for providing medical, dental, longterm disability (LTD), shortterm disability (STD) and life insurance coverage for active employees over age 65. While most companies have already determined what changes they might need to make, 10% of respondents have not considered what to do about benefits for employees who stay on after turning 65. For those who have, there is not a single answer that applies across all benefit areas.
With respect to LTD, however, the issue is clearly settled: the overwhelming majority of employers (81%) have determined not to add post-65 benefits. This result was to be expected, given the position taken by the Manitoba Human Rights Commission in 1998 that the termination of an employee’s LTD benefits at age 65 is not discriminatory. However, even in light of this ruling, 9% of employers are either already extending LTD benefits beyond age 65 or planning to do so in the future.
There was more variation in response with respect to STD and life insurance coverage. Regarding STD, respondents were almost equally split between deciding not to add post-65 benefits (34%) and already offering them (31%). This issue is far less clear-cut than LTD. If an employee becomes disabled and goes on STD, he or she may well be entitled to some benefits, but employers are uncertain how to identify the point at which a post-65 employee moves from disabled status into retirement.
Cost Analysis
Employers who offer post-65 benefits should be prepared for higher benefit costs, simply because medical needs increase with age. There are, however, other benefit considerations for organizations with older employees.
Provincial employment standards legislation allows distinctions within benefit programs based on age, gender and marital status. But a drastic change in coverage once an employee turns 65 may amount to dismissal. Organizations should provide plenty of notice of any changes in benefit coverage for post-65 employees. If employers already offer post-retirement healthcare benefits, an older, active workforce may not have a significant impact on benefit costs. Costs would simply shift from the retiree benefit plan to the plan for employees.
In recent years, certain provinces, including Nova Scotia and British Columbia, have made changes to their eligibility for provincial seniors drug coverage.
Similar rules have been proposed under Ontario’s Bill 102, under which working seniors may be required to look to their employer’s plan as first payer for drug coverage, rather than the Ontario Drug Benefit Program.
Few Canadian employers currently have many—if any—employees over the age of 65, so the present impact of eliminating mandatory retirement is minimal.
However, the wave of baby boomers will begin to hit age 65 by 2011, so employers will have to address the issue of benefits for older workers shortly. In addition, changing demographics may require organizations to look to over-65 employees to fill the talent shortage and, in fact, employers may want to consider benefit design options to attract and retain this age group. While an older workforce necessarily means higher costs, having skilled employees on hand—no matter what their age—may well justify increasing the benefit budget.