According to Statistics Canada projections, one out of every four working Canadians could be age 55 or older by 2021 and, therefore, at or near retirement. Their replacements in the workforce will be significantly younger, with different belief systems and needs. As a result, it’s crucial for organizations to formulate strategies designed to keep their skilled boomer workers on the job as long as possible, while also planning ahead to attract and retain younger talent.
For benefits consultants, this means thinking outside the box and honing and redefining the choices available to employers. The following are alternatives to traditional group benefits plan options that may increase in popularity in the coming years.
DC benefits plans
In recent years, DC benefits plans have gained traction as a solution for small businesses looking to control costs while still offering coverage to employees. This option allows an employer to give employees a defined sum, which they can then use to purchase their own individual plan. The employer can also allocate a specified amount into an employee’s tax-free healthcare spending account. To maintain the tax-free status, all expenses must fall under the Canada Revenue Agency guidelines for such an account.
Flexible benefits
Flexible benefits were introduced about 25 years ago in Canada, but they have gained momentum over the past decade. A 2009 Aon Hewitt survey on flexible benefits in this country revealed that 60% of responding organizations offered a benefits plan with a flex component, up from 41% in 2005.
If set up properly, flex benefits can be cost-effective while meeting the needs of different demographic groups—from older employees looking for comprehensive coverage to recent graduates with few health issues.
Aon Hewitt’s 2011 Employee Benefits and Trends Survey indicated that 70% of U.K. employers already offered or were about to introduce flexible benefits plans. Asked about the most popular benefits provided under such a plan design, respondents most commonly cited buying vacation days, bikes-for-work schemes and childcare vouchers. This is just a taste of the many options available under a flex plan, and it illustrates why employees tend to respond favourably to such offerings.
Flexible benefits can even help employers take wellness a step further. A U.S. trend that’s beginning to take hold in Canada awards additional flex credits or reduces premiums for plan members with healthy lifestyles—for example, if they participate in a disease management program. But programs of this nature must be voluntary for members—participation must not be a condition of coverage.
Voluntary benefits
Voluntary benefits represent another interesting option for employers that want to build a cost-effective plan that is attractive to employees. This adds a voluntary component to a traditional plan, to create a quasi-flexible benefits plan. Two of the most common voluntary benefits offered today are critical illness and optional life insurance. Other options can include pet or auto insurance or set dispensing fees at preferred pharmacists.
Voluntary benefits enhance benefits packages by offering employees extra options that are 100% employee-paid but offered by benefits providers at preferred rates. This allows employers to offer these extras to employees while still maintaining their budgets.
As workplace demographics undergo a rapid shift over the next decade, employers will have to rethink their benefits plans so they take all employees’ needs into account but, at the same time, remain cost-effective for the organization. Thanks to a constantly evolving benefits environment, solutions are being developed and adopted that take both of these needs into account.
Moracine Graham is a consultant at STRATA Benefits Consulting. moracinegraham@stratagroup.ca
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