Retiree benefit plans are shrinking or dropping off the map altogether, Mercer found in its 2015 post-retirement benefits trends poll released today.
Just 15 years ago, most large Canadian companies offered one or more retiree benefit plans, with retirees paying little or nothing. But costs for those plans have jumped by 150 per cent since 2000 with prices for specialty drugs expected to push them even higher, according to the Mercer report.
The poll of 289 Canadian organizations found that in the past four years, 22 per cent of respondents had made reductions to their retiree benefit plans and 14 per cent had made improvements. But in the future, just four per cent will make improvements, and 17 per cent plan to cut.
Read: The end of retiree benefits?
Companies looking to make changes today are focusing less on plan closures and more on implementing annual or lifetime limits or sharing costs with plan members, the Mercer report suggested.
Implementing such changes to retiree plans is a new trend. Mercer found that in the last four years, just 21 per cent of plan sponsors made cuts to retirees and instead focused on new hires and, to a lesser extent, active members. But of companies planning to reduce benefits in the next three years, 42 per cent will apply cuts to retiree plans as well.
That may be because “some companies are looking to make a second or third round of cuts; some are becoming almost desperate to stop or slow the financial bleeding; and some may be willing to test the boundary of possibility, as long as reductions aren’t significant enough to trigger a class-action suit from retirees,” said Mercer.
The poll also found that 71 per cent of respondents aren’t interested in offering retiree benefits in the future, although others are considering plans without an employer subsidy or with a partial one.