When it comes to government benefits, chances are many of your employees don’t know what’s available or what they’re entitled to. Is it your job to enlighten them? Maybe not. But if you accept the fact that government benefits can have a significant impact on the economic well-being of retired employees, and if you care about helping your employees make informed financial decisions, then it makes sense to give government benefits prominent billing in your communications program.
The fact is, many Canadians are missing out on valuable government benefits. Here are some startling statistics from a research paper commissioned by the Task Force on Financial Literacy:
- 160,000 seniors are not getting the Old Age Security (OAS) benefit they are entitled to receive (representing almost $1 billion in lost pre-tax income);
- 150,000 seniors are not getting the Guaranteed Income Supplement benefit they are entitled to receive; and
- 55,000 Canadians are not getting the CPP benefit they are entitled to receive.
Many employees continue to labour under the misconception that they don’t qualify for government benefits or that those benefits won’t be available when they retire. At the same time, many employers fail to recognize the significant role that government benefits play in providing middle-class Canadians with retirement income security.
A working couple who is retiring today at age 65 after earning the average industrial wage throughout their careers will receive a combined annual CPP and OAS pension of about $36,000, indexed for life. That’s a significant amount of retirement income.
Employees need to understand the value of government benefits. They also need to know that some of these benefits won’t be clawed back just because they receive a pension from their employer (unless their total individual annual retirement income happens to exceed $67,668—and even then, only OAS is affected and won’t be completely clawed back unless their total annual retirement income exceeds $110,123).
And then there are programs like the Home Buyers’ Plan, Lifelong Learning Plan, GST/HST New Housing Rebate, Home Adaptations for Seniors’ Independence and the Canada Education Savings Grant. These programs tend to be undervalued and underutilized. For example, the take-up rate for the Canada Education Savings Grant, which provides additional RESP payments for all children under age 17 regardless of family income, is just 40%.
Breaking down the barriers
So, what’s stopping employers from communicating government benefits? There are several key barriers, including:
- an implicit belief that promoting government programs is the government’s responsibility, not the employer’s;
- a lack of understanding of government programs and services;
- a vague misconception that most government benefits (healthcare and registered savings plans excepted) are targeted exclusively at the unemployed or the unemployable;
- the lack of a suitable communications channel to discuss benefits that are not part of a company-sponsored program; and
- a failure to recognize that company contributions to government benefit programs are a significant component of total compensation.
Total rewards programs that provide personalized annual statements showing the employer and employee contributions that have been made to government programs are a step in the right direction. They fall short, however, when it comes to educating employees about the range of government programs available and the amount of money that’s being left on the table when employees fail to take advantage of those programs.
In the absence of effective government outreach, helping your employees understand and access government programs can make a major difference in their future financial security. That’s a pretty big return for a minimal investment.