As with many other things, employee benefit plans are beginning to see the impacts of the aging Baby Boomer generation. We are seeing an increasing trend in people working longer – some because they have to, but also some because they are healthy enough to do it! This results in several challenges that many employers (both small and large) will need to deal with.
Typically, insurance companies have used a “standard” termination age for benefits coverage. Not that long ago, benefits were not available for employees once they reached the normal retirement age of 65; this included termination of group Life insurance, disability insurance (both short- and long-term) as well as health and dental benefits. Many carriers have now extended the termination age for health and dental benefits to provide coverage until “retirement”, at whatever that age may be. We have also seen an increase in the termination age for Life insurance; it is not uncommon to see the maximum age at 70, or in some cases 75 years old.
Even with the changes for these benefits, insurance companies are hesitant to offer disability coverage beyond age 65. There are a number of reasons for this, including:
– Increased risk of injury;
– Higher insured salaries;
– More time spent away from home, typically in a warmer climate.
In addition, if disability coverage were to be made available for these employees, the premiums charged would be prohibitively expensive. Using the principles of group insurance, everyone participating in the plan would share in these substantially higher premiums. If an employee were to convert their group coverage to an individual disability policy, the increase in premiums would be borne entirely by that employee; however, there are only a few insurers that are willing to take on that risk.
The insurance industry is changing very slowly. There are a number of contract changes that are now included to ensure coverage remains available to these employees, while continuing to maintain the affordability of premiums. As the average age of retirement continues to increase, these issues will only become more important.
There are several resources available to companies that would like to modify their benefits and wellness programs to help recognize the services provided by this group of employees. If you would like to read more on this and similar topics, please visit www.smallbizadvisor.ca/group-retirement.
David Maltman / Benefits Specialist / PEO Canada /