There was a time when few thought about retiree benefits. Now, if you are part of Baby Boomer generation (born between 1946-1964) or even a late Generation X (born 1964-1980) coverage beyond your working years may be a more of a prominent consideration.
Nowadays, barely half of retirees retain corporate health benefits. The rising costs of health care in our country as well as demographic shifts and other economic influences contributed to its decline.
Increasingly, the Canadian government looks for ways to control costs, which means more of the spend falls to private plan sponsors. Many employers have opted not to assume the responsibility for funding post-retiree benefits. As a result, aging Baby Boomers stay in the workforce longer and in some cases, for reasons other than the love of their work. The reality of keeping their benefits in force weighs heavily on their mind particularly if the employee, a spouse or a dependent child, has a chronic disease.
According to a recent Aon Hewitt survey, many employers simply feel they can't afford to offer retiree benefits and so they put plans in place to phase them out of their benefit plan offering. Of the 225 Canadian employers Aon Hewitt surveyed, 44 percent don't currently offer any retiree benefits and another 10 percent offer one that is closed to new entrants. In addition, almost 20 percent of respondents said they would consider offering certain retiree health benefits if expenses were either shared or completely passed on to the retirees.
Similar to a recent blog post, which touched on thinking outside of the box for creative ways to address retiree benefits coverage, the idea of creating opportunities for partial or full retiree funding at group rates may work well to satisfy employees facing retirement. The results may be that these aging employees are more productive while at work and don't stay beyond their ability to keep full engaged and productive.
Considerations for employers contemplating how to avoid footing the complete bill for retiree benefits include alternate financing vehicles such as RRSPs and the flexibility of a Health Care Spending Account.
Any option deserves considerable thought and while it may seem daunting to pursue the idea of how to make retiree benefits work while not depleting the annual benefits budget, it can be simplified by working with a trusted financial advisor. Helping you consider the generational differences within your workforce and how they impact engagement and productivity are key. We're here to help you design the right benefits plan and invite you to contact us so that you can continue focusing on what you do best.
Whenever there is a categorization of a generational cohort there tends to be variances in terms of the year it starts. Some say that Gen Z begins in 1995 and others say starts as of 1991. For argument's sake, let's assume the year 1993.
Gen Z ranges from 11 to 20 years of age and represents your kids or your neighbours kids. These youngsters have never known a world without technology or the Internet. An Encyclopedia Britannica would likely collect dust in their grandparent's home and might be pulled out as a novelty to show their friends how archaic research was done in the "old days".
As you may already have some Gen Z in your workforce, it is a great topic to begin exploring particularly as it relates to what's important to them and what they value in a benefits plan.
Research shows that Gen Z has a strong sense for social justice. They are 'rebels with a cause' and they represent a large cohort of 2 billion worldwide who follow after Generation Y (born between 1980-2000). They seek jobs that have a social impact and have more of a tendency toward the entrepreneurial spirit than their predecessors. According to a report by Sparks & Honey, 72 percent want to start their own businesses and 56 percent are prudent when it comes to saving. This cohort appears to be smarter, more connected, and more educated. They are creating their future; are we ready for them?
What will these young innovators value? We are learning that they are realistic and practical. Since they are just starting out in the workforce and may be interns or in more of an apprentice-type role, they could still have student loads to pay off. In addition, they might not be finished with formal education and will be looking for an employer willing to help carry the continuing education freight. As such, gaining job experience may be seen as a stepping stone for them. In addition, they are practical enough to know there is value in having health benefits, but they also value an employer that makes a difference locally and globally -- an organization that cares about the planet and the future of the human race.
According to a recent study conducted by Randstad Canada, Gen Y and Gen Z value health benefits, job creation, and gender equality. The report also concludes that health benefits are the most important employee benefits they expect at 27 percent and more for women of this cohort at 40 percent than men at 23 percent.
Perhaps it is time to think outside of the benefits plan box particularly when it comes to this youngest generational cohort. The more employers are able to cast a wider net when it comes to categorizing the definition of benefits, the greater their success at attracting the best and brightest of this cohort. Gen Z will be looking for greater work flexibility such as four-day weeks, tele-commuting, or a compressed work schedule. They will be drawn to employers that offer tuition reimbursement assistance as well as well laid out training and development programs.
Employers have no easy task when it comes to developing benefits programs and communications strategies for a multigenerational workforce that spans a 50 year generational gap. Understanding what these cohorts need and value will increasingly shape talent attraction and retention strategies. Whether you're looking to make incremental changes or more comprehensive ones, we're here to help. Contact us so that you can continue focusing your energy and efforts on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.