Following the ebbs and flows of the Baby Boomer generation (born between 1947-1964) can be an interesting and insightful experience whether you are of this generational slice of the workforce pie or not. Baby Boomers continue to be studied, surveyed, and analyzed for their preferences, buying habits, and saving patterns. Regardless of the industry, the behaviours of this demographic makeup of our society simply can't be overlooked and particularly not with 10,000 North American Boomers celebrating their 65th birthday every day for the next 20 years. (Source: Pew Research Center).
In the pension and benefits world, the life event milestones of Boomers demand greater attention and strategic thinking. More focus is being placed on what benefits coverage will be appropriate as well as how to best to draw down on investment income in their post workforce participation world. With decumulation, the question becomes not whether a person saved enough for retirement, but how best to draw down regular income post workforce participation and not run out of money before death. It comes down to balancing acceptable risk versus a sustainable withdrawal rate.
There are various methods to help people draw down on their investment assets. Looking at the cost, risk and flexibility as well as understanding the person's personal preferences related to their finances is important. As this topic heats up, some questions to consider when planning a withdrawal from workforce participation include:
1) Are there any debts that should be paid off so there are no payments taken from retirement income?
2) How much if any of a "rainy day" emergency fund is needed?
3) Are there any funds to be set aside for specific bequests?
4) What other assets should be factored in (e.g. house)?
5) What type of expenses exist and how should they be broken down based on essential (necessary for survival), basic (ability to travel south each winter) and discretionary (like make charitable donations)?
When addressing the decumulation strategy, thought should also be given to one's 1) private pension, 2) government sponsored benefits, 3) any continued workforce participation, 4) taxation, 5) investment costs, interest rates and the rollercoaster ride given by stock markets.
There are several decumulation methods and each varies when it comes to cost, risk, and flexibility associated with them. They include:
1) working with a financial advisor
2) lifetime annuity or term annuity
3) draw down pension and/or target date funds with a decumulation feature
4) home equity release
5) Shifting investments to TFSAs
6) RRSP "meltdown" - making RRSP withdrawals earlier in life if you'll face tax at a lower rate than anticipated in the year of your death.
Increasingly, approaches to addressing decumulation will take center stage where accumulation discussions previously dominated. There is much to unbundle and address on the decumulation topic particularly as it pertains to what can be withdrawn on a tax-free basis and the different age limitations related to annuitizing or converting assets. We invite you to contact us to discuss what decumulation strategies would work best for your corporate pension plan arrangement as well as best practices related to educating your plan members.
We're here to help so you can focus on what you do best.
Just as certain as snow is to arrive in Canada in winter and tulips are to bloom in spring, we, in the benefits industry, await the results of the annual Sanofi Canada Healthcare survey every June. While the focus of the questions may vary, the analysis of the results consistently proves to be of value whether from a plan sponsor, plan member or service provider perspective.
The 2016 findings continue to compare and contrast the views and wishes of surveyed plan members and plan sponsors. Where plan sponsors may wonder how plan members view the use of their benefits, the survey helps to bring clarity. Of the 1,500 plan members surveyed across Canada, 43% view health benefits plans as something to use only to treat or prevent illness or injury whereas 35% see it as extra compensation and something to use as much as possible to get their money's worth. Another 23% see health benefits as both a resource for health and extra compensation. Surveyed plan members also gave high marks for their plan's coverage of prescription drugs, basic dental and paramedical services. They were least likely to rate their health care spending account and vision coverage as excellent or very good.
How did plan sponsors respond to the same questions? There were noted differences between the degree of satisfaction compared to those of their plan members. While both parties rated prescription drug, basic dental and paramedical coverage highly, there was a 20 point differential in more favourable responses by plan sponsors in each of these three categories. Where plan members felt vision coverage was less than excellent or good, plan sponsors responded this way regarding vaccine coverage instead.
Demographic differences continue to surface and are reflected in the survey responses. Specifically, this was noted in plan member responses in massage therapy claiming patterns. Of all survey respondents, 43% of plan members indicated they submitted at least one claim for massage therapy in the past year, Millennials (born between 1980-2000) were more likely to get massages to relax or relieve tension (47%) where Baby Boomers (born between 1947-1964) were more likely to seek out massages to treat injuries or conditions.
Another insightful survey finding pertained to chronic disease in that 59% of plan members reported having at least one chronic disease or condition. Of those age 55 to 64, 79% of them reported having been told they have a chronic condition such as arthritis, asthma, cancer, depression, diabetes, heart disease, high cholesterol or other. This percentage dropped to 40% for plan members age 18 to 34. Understanding the demographic makeup of one's organization is an important data source for predicting claiming patterns specifically where high cost prescription medications may be needed to treat chronic diseases. Those diagnosed with chronic conditions would like to know more about their disease and how to treat it. They also would be agreeable to meeting with a healthcare coach if available through their health benefit plan.
When asked if it is hard to change their lifestyle habits that they need to change in order to improve their health condition, 67% of plan member respondents said they somewhat or strongly agreed this was the case. The result? More emphasis to support chronic disease management is warranted in the workplace. Finding ways to motivate plan members to make the necessary lifestyle changes will continue to be a lofty and difficult challenge. Only 28% of plan member respondents said they are doing fine when it comes to getting enough exercise with 40% indicating they were doing fine with eating healthy and 41% reporting they were getting enough sleep.
The 2016 survey creates a call to action from its advisory board that health benefit plans must change if they are to survive and "fulfill their potential as agents for productivity in the workplace." Good news here is that 81% of plan sponsors would like to know where costs are coming from based on the health profile of their organization. There is a real interest in using data to eliminate conjecture and subjective hunches. Survey findings such as the Sanofi report create an opportunity to dialogue and surface additional questions that are organizationally specific. Looking to the Sanofi survey findings allows plan sponsors to compare and contrast what's happening with the views and experiences of their own plan members and potentially allow them to drive healthy organizational outcomes.
Is it time to look at your group benefits plan in light of this year's Sanofi survey findings? Let's connect to discuss benefits trends, claim patterns and proactive solutions. Please contact us, We're here to help so you can focus on what you do best.
On June 6, 2016, the legal ban on physician-assisted dying expired allowing Canadians to legally access assisted dying under the guidelines outlined in the Supreme Court of Canada's ruling in the Carter case. Carter v. Canada was a landmark case that successfully challenged the prohibition of assisted suicide as being contrary to the Canadian Charter of Rights and Freedoms. The outcome: Canadian adults who are mentally competent, suffering intolerably and enduringly have the right to a doctor's help to end their life.
What does this mean for Canadians and what are the implications for drug costs? There are still a number of grey areas in this emotionally charged and controversial topic as well as questions regarding what drugs might be used to facilitate medically-assisted dying.
Since June 6, our country's doctors, nurses and pharmacists may be called upon to help people end their lives. Many of these healthcare practitioners may be reluctant or unwilling to provide this type of medical assistance and they aren't required to do so if they so choose. It is apparent there remains a lot of uncertainty and a lack of clarity regarding who is eligible for medically assisted dying. In some provinces, two people must witness the signature of the patient and in other provinces, no such witnessing is necessary. Other examples allow people with mental illness as their only cause of suffering to be eligible whereas this is not a sufficient reason for medically assisted dying in other provinces.
There is also much debate at the Senate level of our government as some say that Bill C-14 does not comply with the Supreme Court ruling in that it contravenes the Canadian Charter of Rights and Freedoms. Opponents say that the bill restricts access to people who are already near death. At present, Bill C-14 prohibits people with a severe chronic illness such as Alzheimer's, Huntington's disease and Multiple Sclerosis their right to die because their death is not considered imminent.
What are the drugs? Physicians, provincial health ministries, pharmacists and private insurers are trying to sort out the answers related to what specific drugs will be needed to painlessly and humanely end a patient's life and honour their request to die with dignity. At present, oral drugs that could be taken by eligible people are not available in Canada. A barbiturate, pentobarbital, is a drug approved in Canada for this purpose, but the cost of a single dose, if it can be obtained by the company who sells it, is $23,000. Its is not known if pharmacies dispense drugs prescribed for medically assisted dying and therefore it isn't possible for private insurers to confirm payment of these drugs.
Who administers the drug? Currently, doctors who agree to help with medically-assisted dying must administer the lethal medications.
Who pays? It is believed that the provinces will cover the cost for the lethal prescriptions but this has yet to be confirmed by all provinces. In Quebec, the price tag for euthanasia drug kits is covered by the province. Ontario has said it will support covering the cost as well.
Bill C-14 and the topic of medically-assisted dying is fraught with controversy for our nation, our elected officials, and the medical community. We continue to monitor this topic to ensure we're able to offer our clients the most informed support and guidance. Please contact us for additional information and resources. We're here to help so you can focus on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.