Employers may see the value in offering retiree health benefits, but many feel they can’t afford them, according to a recent Aon Hewitt survey.
Of the 225 Canadian employers surveyed, 44% do not currently offer any retiree benefits. survey results also show that another 10% of employers offer a retiree benefits program but have closed it to new entrants.
Furthermore, approximately 20% of respondents indicated they would consider offering certain retiree health benefits if the expenses were either shared or entirely passed on to retirees. For those that do not offer retiree benefits, the top reason reported was “high costs compared to perceived benefit to employees” (76%). More specifically, 66% attribute the cause to the continuous rise in healthcare costs.
However, there are ways for employers to provide these benefits without footing the entire bill. the survey results indicate that many employers not currently offering these benefits would consider the option if retirees shared the costs, explains Greg Durant, senior vice-president and chief actuary, health & benefits practice, with Aon Hewitt. To make this option more affordable for all parties involved, possibilities include alternative financing vehicles (such as RRSPs) or moving to a DC retiree medical plan. according to Durant, for the latter option, the employer would limit its annual contribution to a fixed dollar amount, and retirees would choose one plan from various plans offered. Funds from the employer would then be used to purchase the chosen plan, with any remaining costs covered by the retiree and, if needed, by a healthcare spending account.
When determining how best to allocate their financial resources, employers must consider all age groups. “Different generations are seeking benefits that can accommodate their current lifestyle, as well as changes along the way. Companies will have to evolve to meet those needs if they want to account for changes in the workforce and retain their talent,” states Durant. He further explains that we may begin to see this change as companies evaluate the best ways to maximize the contributions of all parties involved when it comes to designing benefits: the employer, the employee and the federal and/or provincial systems. “By maximizing the most effective purchasing power of each of these contributors, a more cost-efficient program may be possible,” he adds.
Ultimately, whether employers want to focus on employees close to retirement or on those just entering the workforce, the right benefits package can be a useful tool to attract and retain the best talent.
Sarah Markh is a freelance writer with a background in HR, based in Toronto.
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