As more employees work past the traditional age of retirement, plan sponsors need to determine what their health benefits plan will look like for these individuals. The continuation of benefits can become an important, valued part of succession planning—equally important, it removes the risk of liability.
“Right now there is a disconnect between the Employment Standards Act, which supports the termination of benefits at age 65, and the Canadian Charter of Rights and Freedoms, which says you cannot discriminate based on age,” says Sherry Shaw, vice-president of Accompass, a Toronto benefits consulting firm. “We recommend that employers proactively manage this, because the number of people working past age 65 is increasing year after year.”
Ten years ago, employees aged 65 to 69 accounted for two percent of all insured individuals covered by private prescription drug plans, according to TELUS Health’s book of business. That number has steadily inched forward, reaching four percent in 2018.
Employees who work past age 65 may not be financially ready to retire, or they simply do not wish to stop working yet. Either way, the continuation of benefits can be considered part of succession planning. “Employers need to determine their philosophy as an organization regarding how they will support those who choose to work past age 65,” says Shaw. “Holding on to talent can be key to the business as employers bring in younger people who can learn from older employees. This applies not just to C-suite employees but to all those in positions that help keep the doors open every day.”
Shaw adds that the continuation of benefits past age 65 is likely not as costly as plan sponsors may think. Having said that, the proportion of employees older than 65 will peak in the next 10 years as the last of the baby boomers reach the traditional retirement age. “The key is to model this out so you have an idea of costs in the future and budget for that, or look at how plan design can be modified so that you can continue to support these employees and not cause undue hardship. For instance, coverage from the provincial plan will come into play so there will be some coordination there,” she notes.
The issue of discrimination came to the forefront in May 2018, when the Ontario Human Rights Tribunal ruled in favour of Wayne Talos, an employee who sued his employer after his benefits terminated at age 65, even though he was still working full-time.
“The key for that decision was the actuarial evidence,” says Jules Monteyne, an associate at Koskie Minsky LLP in Toronto. “Plan sponsors need to be wary that if their plan discriminates against employees aged 65 then it would be prudent to have actuarial evidence showing that the increased costs to the plan put plan sustainability at risk. If plan sponsors can’t provide that evidence, they risk a finding of discrimination.”
Perhaps more to the point, Monteyne emphasizes that the “Tribunal clearly signalled that stopping benefits at age 65 could not be actuarially supported.” With that in mind, and until legislation amends the Employment Standards Act, Monteyne advises that “the safe bet for plan sponsors is to ensure health benefits are not cut off at age 65.” Plan sponsors would do this by amending their insurance contracts for group health benefits to extend coverage beyond the age of 65 for those still working.