NEWSLETTER
The Impact of an Aging Workforce on Group Benefits
September 2007
Replacement workers are in short supply, so employers are coming up with creative ways to convince these employees to stay on past their usual retirement age. As well, they are encouraging others to adopt a phase-out strategy. Many corporations wish to hire older and more experienced workers that have retired from other companies.
Many group benefit programs have been designed with the traditional model of hiring younger workers and seeing them retire on or before age 65. Plan sponsors have to adjust their plans to reflect older workers being in the workforce.
Here are some of the issues to keep in mind when re-designing your group benefit program to accommodate older employees:
- Claims usage: older employees use more prescription drugs and practitioners such as physiotherapy, chiropractic and massage. Keeping workers employed for more years will mean more claims.
- Normal retirement age: many plans were designed to terminate at age 65. After that age, employees would have to look after their own benefits in combination with government programs. The realization that an extension of this age will result in upward pressure on premiums.
- Reduction or termination of employee life insurance: most employee life insurance in a group plan reduces at age 65 and terminates at age 70 or 71. Employers will have to convince group insurance carriers to extend these ages.
- Termination of long term disability: long term disability usually stops at age 65. However, some employees are already working well beyond this age and insurers will have to consider underwriting these workers.
- Termination of Extended Health Care and Dental Care benefits: again, many of these stop at age 65. If they are to be extended to 70 or higher ages, then premiums will be going up to compensate for the increased claims and increased risks.