It is perhaps a blessing and a challenge to think that we are living longer and healthier lives. As a result of better medical treatment, improved nutrition, and accessibility to medical information, people in Canada and in developed nations can expect to live longer. While living longer in good health is great news, the worry for many facing retirement involves concerns about living beyond one's savings.
The 2007 HALE data (the most recent year data is available), indicates that Canada's life expectancy is 80.7 years with the expectation that people could live in good health until age 73 -- representing 90.5% of life lived in good health. While the medium may be age 80 for life expectancy, many are living well into their 90s and those that reach the Centenarian milestone are growing. Statistics Canada's projections indicate that by 2031, there could be more than 17,000 people who will celebrate their 100th birthday. By 2061, this number should be closer to 80,000.
What does this mean to employers who have benefit plans and employment arrangements designed with the understanding that retirement age remains age 65? Many benefit plans and succession plans (if they exist at all) don't factor in the growing numbers of mature workers with no plans to retire early or at age 65. Many plans were built around the mindset that workers generally retired at age 65. With the abolishment of mandatory retirement in 2006, some employers have yet to adopt a different way of approaching this "grey" cohort of workers.
Back in 1971, the median age of the population was 26.2 years. Then in 2009, it was 39.5. In 2036 it is expected to be between age 42 and 45. As of July 2015, for the first time in history, Canadians 65 and older represented more of the population than those in the under age 15 category. This number represents close to 5.8 million people in a nation of 35 million. While by international standards, the population of 65 and over is comparatively smaller than other G7 nations, it is still a force to be contented with particularly when addressing workforce planning and benefit plan management.
As per the Administration on Aging (AOA), in 2014, persons 65 years or older represented 46.2 million or 14.5% of the U.S. population or 1 in 7 people. In Canada, comparatively, 1 in 6 people are over age 65 and represent 16% of the population. By 2040, this cohort is expected to grow to 21.7% of the U.S. population and this number might be slightly higher in Canada.
Employers are finding they need to address how to handle the mature workforce. Statistics Canada reports that 25% of Canadians are working past the traditional retirement age of 65. Sun Life's Unretirement Index agrees and reports that there is a growing number of Canadians expecting to be working full-time at age 66.
The trend in providing coverage to reflect the needs of this elder cohort isn't keeping in step. A particular focus should be given to benefit plan language and the wording around retirement and age limitations specifically pertaining to life insurance reduction and long-term disability coverage.
More discussion with plan sponsors should involve how they wish to extend coverage and how their benefits philosophy aligns with their core values and mission statement. As we track these important workforce trends, we layer a deep understanding of how they relate to benefits and pension plan funding, administration and management. We invite you to contact us to discuss strategic plans for navigating the waters of benefit provisions for mature workers. We're here to help so you can focus on what you do best.
Employment Insurance Program waiting period reduction: What can a one week change mean to employers?
The Liberal government has taken action to make sweeping changes to our Employment Insurance (EI) Program where the combined total cost is estimated at $1.45 billion for 2017.
While several of the EI program changes have already taken effect, one that is more complex won't kick in until January 1, 2017. The Budget Implementation Act 2016, No. 1, received Royal Assent on June 22, 2016 and reduces the EI disability coverage from two weeks to one week.
What is the EI waiting period?
The EI waiting period is a period of time that must be served before a claimant can begin to receive EI benefits and it has been set at two weeks since 1971.
What is the EI payment period?
The EI payment period is 17 weeks and includes a 2-week waiting period where no benefit is paid. A total of 15 weeks of paid benefits is factored into the 17 weeks.
What changes happen to the EI Program on January 1, 2017?
The January 1, 2017 changes mean that the payment period will include only a 1 week waiting period where no benefit is paid followed by a 15 week period of paid benefits. This change results in only a one week period of no paid benefits.
Of note, the number of weeks of benefit is not changing and there are no plans to change the timeframes that employers need to issue records of employment.
What could a one week difference represent for employers and service providers as well as Canadians in need of this benefit?
According to The Honourable MaryAnn Mihychuk, Minister of Employment, Workforce Development and Labour, reducing the two-week waiting time is "a systemic change. It impacts skills programs. It impacts other associated support. That's very complicated." This complex change is good news for claimants who will be without income for a shorter period of time if they apply for EI, but the change require additional work on behalf of employers and service providers who need to consider the impact to employee communications, handbooks, existing disability plans and collective agreements. It could mean that insurers will ask for an LTD premium adjustment for employers opting to shorten the LTD elimination period from 119 to 112 days . Employers face the question of whether or not they wish to absorb a potential cost increase.
What if you have a registered plan with the EI Premium Reduction Program?
If you have a plan registered with the Employment Insurance Premium Reduction Program you will need to reduce the waiting period for Weekly Indemnity (WI ) and/or Short-Term Disability (STD) benefits from 2 weeks to 1 week in order to ensure the preservation of EI premium reductions. This change may represent a cost increase and will depend on the benefit plan design and use.
What about insured STD or self-insured salary continuance plans?
If you have a plan with a waiting period of 7 or fewer days there is no impact to you and no action that needs to be taken.
If you have a plan with a waiting period of more than 7 days, please contact us to discuss the implications.
What about requirements for Supplementary Unemployment Benefit (SUB) Plans?
SUB plans -- also known as EI top-up plans -- are tied to EI claims linked to layoffs, EI sickness benefits, maternity and parental leave and compassionate care. For existing SUB plans, this change may reduce costs as employees will be able to access EI benefits earlier during their leave period. It depends on the duration of the SUB plan benefit payments and utilization. If you have specific questions about your SUB plan, please contact us.
What does this mean for employer-sponsored Long Term Disability (LTD) Benefits?
Many employers structure their LTD program with benefits beginning only after a claimant uses up EI sickness benefits or after the 17 week elimination period or 119 days. This means that sickness benefits will run out at 16 weeks or 112 days. If you offer LTD benefits that starts after the 17 week of EI, consider if an amendment to the plan is warranted given that employees will have 1 week where no benefit is paid.
As 2016 draws to a close, employers will need to consider if the change impacts their current benefit program. Good news for employees comes from Service Canada who advises that the Canadian Life and Health Insurance Association (CLHIA) will give impacted employers a transition period to make the necessary amendments to their plans AND they will continue to qualify for the EI Premium Reduction Program during the transition period.
We are keeping a close watch for any EI Program updates so we remain well positioned to offer timely support regarding the implications to employer-sponsored salary continuance and disability benefit plans. We want to ensure your program runs smoothly and we invite you to contact us if you have any questions. We're here to help so that you can focus on what you do best.
Absenteeism costs our economy billions every year. In fact, a recent report by the Conference Board of Canada stated that it costs the Canadian economy $7.4 billion per year in direct costs alone.
What happens when we throw indirect costs in the mix? It adds another $20 billion in costs per year.
Approximately 48% of companies say that employee absences cost them 1% to 2% of payroll, and 27% report these costs in the range of 3% to 5% of payroll. When indirect costs are factored in, absenteeism related costs can account for as much as 15% of payroll.
How much of this cost is avoidable? In these economically challenging times, increasingly, companies are looking for ways to increase their efficiencies and effectiveness. Managing their absence related processes is an important way to drive down direct and indirect costs as well as increase employee productivity and engagement.
By aligning health and productivity initiatives, companies can leverage integrated disability management programs in order to manage costs and show the importance of the health and well-being of their employees.
What does that look like for employers? It begins with the building of an overall wellness strategy that factors in all of the absence related processes, documentation and programs. The strategy looks for ways to eliminate stand alone and fragmented procedures. When an employee's illness or injury leads to a disability claim, the last worry the employee wants is having to deal with all the paperwork and processing of a claim; however, the burden of proof for a disability claim rests with the claimant.
By designing an integrated disability management program, employers can reduce absenteeism in duration and frequency, educate employees about wellness and streamline the disability claim process, when required.
Join me for Part 2 of this series as I explore the core components of an Integrated Disability Management Program.
From time to time, I hear this question from clients, "I've got an expectant mom who wants to cancel her LTD coverage while she's on maternity leave. What should I tell her?"
It is understandable as to why this question surfaces. A plan member who is an expectant mother may feel that she can save money during a time when funds might be a bit short. I offer that during a maternity leave isn't a good time to stop a plan member's LTD coverage. No one can predict the future and unforeseen events could result in negative consequences that have a long term negative impact for the plan member. It is about managing risk and protecting yourself when you might need the coverage most.
Here are key tips to consider when a plan member asks if she should stop her coverage during a maternity leave:
There is so much for an expectant mother to consider when she prepares to have a baby. Worrying about disability coverage and the repercussions of cancelling it shouldn't be one of them.
*pre-existing condition definition "a medical condition that occurred before a program of health benefits went into effect."
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.