Employer-provided benefits past the age of 65
In the current employment context, characterized by a shortage of skilled workers and a rapidly aging workforce, many employers now focus on ways and means of retaining older workers or facilitating their transition to retirement. Given a choice, many older workers, for a number of reasons, would like to gradually reduce their workload rather than end their career in an abrupt fashion. Other older workers would like to put off retirement and continue working full-time beyond the normal retirement age or reduce their hours to part-time.
Older workers must take into account many different factors before deciding to work beyond the normal age of retirement or changing their status from full-time to part-time. For example, a number of employment benefits are no longer available to older workers once they reach normal retirement age or become eligible for a pension. The potential loss of benefits when changing status from full-time to part-time employment may constitute a serious disincentive for older workers who wish to reduce their working time. However, employment agreement clauses that specifically grant part-time employees access to various benefits, even if pro-rated, can offer aging workers more flexibility, and possibly improve and prolong their working lives.
Mandatory retirement: forcing an employee to retire when they reach the 65 is banned across Canada except in the federally regulated sector. Employees are able to choose to retire whenever they wish. The change is about allowing people to continue to work past age 65 if they desire to do so. However, legislation continues to permit age-based distinctions under bona fide group or employee insurance plans, including those that are self-funded by employers or provided by a third party. Age-based distinctions can be made only under insurance-based benefit plans. Employers continue to have discretion regarding the provision of benefits. Thus, benefits do not have to be extended to employees past age 65. Workers older than age 65 are not eligible for many employer group health and dental plans.
As the population continues to age and labour markets tighten, this may become a more significant issue for employers. We are told that insurers on the other hand are resisting change as the risk associated with catastrophic loss increases significantly with age and therefore the cost of some benefits may become prohibitive. While many providers will consider increasing age limits for health and dental benefits, life and disability benefits continue to be restricted.
Employers who already continue to provide benefits for retirees will face minimal cost impact by providing benefits coverage for employees beyond age 65, since they are already doing so under their retiree plan. Otherwise, the cost impact of continuing benefits coverage past age 65 depends on the type of benefit being considered.
As the elimination of mandatory retirement becomes the norm across Canada, employers may have questions about continuing benefits past age 65. That is why we wanted to know, When your employees work past age 65, does their benefits plan coverage stay exactly the same? According to 63 percent of respondents (90 out of 143), the answer is no; employees' benefits coverage is reduced or modified, but not cancelled, once they reach the age of 65. However, 21 percent of respondents (30 out of 143) say benefits plan stay exactly the same despite the employee reaching the age of 65 (see table below for more poll results).
These results indicate to me that employers as well as insurance companies are becoming more aware that employees are postponing retirement as long as they can, and employers need to provide group benefits to employees past the age of 65. However, the benefits are reduced most of the time because when employees reach 65, in general, their health premiums will have to be reduced because employees who need prescription drug coverage past age 65 are sometimes required to pay an additional premium to either a provincial senior health or a drug benefit program or a senior pharmacare program.
With the exception of long-term disability products, which terminate at age 65, many insurance companies can now offer employers the option to continue benefits beyond age 65. One commenter confirmed this fact:
F.Y.I. Our offices currently employ 3 over 65's, and 4 over 60's. The Long-Term Disability portion of the benefit package ends completely at 65, and the life insurance portion is cut in half. Other benefits continue until 70, and will likely be modified at that point, rather than cancelled completely. Ours is an academic environment, with counselling as a large focus.
Employers should review their group insurance contract provisions that specifically identify the age restrictions. Employees at or near these ages should be made aware of their changing benefit(s). However, a drastic change in coverage before and after age 65 might be treated as a breach of employment contract amounting to dismissal in some cases. Caution and lots of advance notice will likely be needed.
Recently, an Ontario arbitrator ruled in Ontario Nurses' Association and Municipality of Chatham-Kent that an employer can reduce or eliminate employee benefits once an employee reaches age 65. Arbitrator Brian Etherington had to rule on the constitutionality of provisions in the Human Rights Code and the Employment Standards Act that permit that allow the benefit plan modifications. With the elimination of mandatory retirement, increased cost and limited availability of benefits for older employees or whether they can provide a different package of benefits to those employees who stay on past 65, employers have had to deal with the issue over and over again. Unless overturned by a higher court, this case confirms that such distinctions are valid in Ontario. For more, read article 34830 (login required).