Tackling the challenges of benefits provision for employees over age 65
by Kim Siddall
Increasing longevity, better health and the elimination of mandatory retirement means many Canadians are delaying their retirement past age 65, presenting employers with both advantages and challenges for managing benefits for this unexpected segment of their workforce.
Statistics Canada’s last census indicated that one in four Canadian seniors were still working in some capacity past the traditional age of retirement, whether driven by choice or economic necessity. This finding was echoed by Sun Life’s last Unretirement index last year, which pointed to a growing number of Canadians who fully expect to still be working full time at age 66. In fact, 2015 marked the first year in the seven years of the study that more respondents expected to be working full time at 66 than those who expected to be fully retired.
There are many advantages to this trend for employers. This cohort of employees brings experience and skill to the workforce. An intergenerational workplace can generate a number of different points of view and create opportunities for mentorship for younger workers.
But there are challenges as well: as we age, we tend to drive higher health costs.
The National Council on Aging indicates that approximately 92 per cent of older adults have at least one chronic disease and that 77 per cent have at least two. A Statistics Canada study that covered the 2007-11 period noted 83 per cent of Canadians aged 65 to 79 take at least one medication, with 30 per cent reporting they take five or more prescription drugs concurrently.
While it stands to reason that healthier members of this cohort are choosing to remain in the workforce, it’s reasonable to assume that in aggregate they will also have higher health claims than their younger colleagues.
While the age of retirement has been evolving over the last few decades, employer-sponsored benefits plans have been slower to respond to this trend with changes in plan design or policy structure. A survey published by Aon last spring asked Canadian organizations about their current benefits practices regarding this group of employees. Only 35 per cent of respondents had formal policies in place governing benefits for older workers. And few indicated they anticipate making changes to their plans to address the unique needs and interest of this employee group.
By and large, the survey respondents offered the same benefits to employees regardless of age. These included medical, dental, out of country emergency medical, and employee and family assistance programs. Short-term disability benefits were offered to all ages of employees by 58 per cent of respondents. However, the majority of respondents had differentiated the benefits available to employees over age 65 for basic life insurance, optional life insurance, critical illness, long-term disability and long-term care benefits.
It’s not unusual for extended health and dental benefits to include termination clauses that are not tied to a plan participant turning 65. It’s more common to include language that references either termination at retirement only, at the earlier of retirement or an age other than 65, such as 70 or 75. Specified age for either a reduction in benefit or termination is more common with life and long-term disability benefits.
While Canadian insurers haven’t traditionally offered insured long-term disability benefits over age 65, some carriers are getting innovative about opportunities in this space, allowing life benefits to continue unreduced at age 65, or long-term disability benefits to continue with a reduced benefit period for employees who meet the “actively at work” definition beyond age 65.
In unionized workplaces, there have been instances where unions have filed grievances against the employer when benefits terminate at age 65 despite continued active employment on the basis that the employer has failed to provide the benefits promised in the collective agreement. Employers should take care to ensure that when a collective bargaining agreement indicates all employees will be covered under the benefits plan, the termination clauses don’t include ages beyond which benefits will not be extended.
Employees over age 65 can add depth and a wealth of experience to a workforce, as well as complexity to an already complicated life and long-term disability benefits landscape. Plan sponsors need to carefully consider how they wish to extend life and long-term disability benefits to their plan members and for how long. A proactive policy and benefits program review will help mitigate financial, legal and workforce management risks that may arise when providing benefits in the over 65 context.