Non-pension retiree benefits such as healthcare and dental coverage can be an important factor in helping employers attract and retain talent. However, almost half of Canadian employers don’t offer any non-pension retiree benefits.
An Aon Hewitt survey of 225 Canadian employers finds that 44% of the respondents do not offer any retiree benefits at all, while another 10% have closed their existing programs to future retirees.
Of those employers not offering retiree benefits, the most often-stated reason (76%) was “high costs compared to perceived benefit to employees,” while 66% blame rising healthcare costs specifically. However, about 20% of respondents would consider offering retiree health benefits such as drug, hospital and dental benefits if the costs are fully or partially paid by retirees.
“With about half of employers not offering retiree health benefits, the challenge is finding ways to make these programs affordable for more people,” says Greg Durant, senior vice-president and chief actuary, health and benefits practice, at Aon Hewitt. “But these results also clearly show that many employers that don’t currently offer retiree benefits would consider doing so if retirees shared the cost burden.”
Among the 56% of companies surveyed that do offer retiree benefits, 85% offer retiree medical coverage, and 82% offer hospitalization. The costs of those programs are shared by employer and employee in about half of the companies surveyed.
Asked for the likelihood of modifying their current plans, 38% say they’re likely to increase retiree contributions, and 31% say they’re likely to reduce or eliminate eligibility for future retirees. Only 8% say they’re likely to improve benefits for current or future retirees.
Meanwhile, a large number of respondents offering retiree benefits are unaware or have not considered a number of planning options that can help make the programs more affordable. More than 85% have not considered or are unaware of alternative financing vehicles, while many (81%) have not considered a “lump sum” buyout settlement to current retirees or moving to a DC retiree medical plan (73%).
“With more than a third of companies looking at reducing or eliminating future retiree benefit eligibility, there is clearly a desire to keep escalating costs in check,” Durant explains. “But it’s also clear that few employers are aware of or fully considering alternative planning options that can help to make retiree health benefits more cost-efficient.”