Retaining golden-age workers may require benefits creativity
To attract and retain employees past retirement age — an increasingly common goal for organizations facing an exodus of older staff — employers may consider adding new benefit options that older employees need or want. Employers will have to consider the cost of these changes and of an older workforce in general.
Not all workers will be older and not all older workers will be alike, so a total revamp of the benefits plan is neither desirable nor advisable. Many workers age 55 or older, for example, will still have young children. Thus, dependent coverage and benefits like RESPs continue to be important for many older — as well as younger — workers.
Other older workers will have empty nests and paid-off mortgages. For them, personal benefits and options for time off may appeal more.
One way to meet these disparate interests is to offer a flexible benefits plan. In the right circumstances, “flex” should make it easier to accommodate the needs of employees as they change over the years. However, employers should also consider adding some new options to their benefit plans to meet the needs of older workers.
Benefit choices for older workers
What new benefits might employers consider adding, whether within a flexible or traditional benefits plan? There are several options.
•Elder-care benefits: As they have typically been offered in Canada, elder-care benefits tend to cover information and referral services (available through the company employee assistance program), but not the cost of adult care (whether at home or elsewhere).
In Hewitt’s 2002 survey, Flex-ability: Employer attitudes toward flexible benefits, two-thirds of respondents indicated that they did not expect to add elder-care services as a benefit, whether as part of a flex plan or otherwise.
If employees are going to work past retirement age, and therefore have limited time to care for elderly parents, employers may want to reconsider adding elder-care services to the benefit plan.
•Home health care: Home health care could well be an attractive benefit to more than just older workers, but will hold a special appeal for members of the “sandwich generation” who are looking after parents, spouses and possibly children who need medical assistance but who aren’t hospitalized.
Home health-care services can cover respite, palliative and personal care, as well as unskilled nursing for individuals recovering at home. For a relatively small investment, employers may find that offering home health care as a benefit gets a lot of bang for the buck. The 2003 edition of The Aventis Healthcare Survey reports that 32 per cent of respondents said concern over the health and well-being of their family was negatively affecting productivity.
•Long-term care insurance: Since provincially sponsored long-term care coverage is limited, older employees might find this benefit particularly attractive. Benefits are provided when individuals are unable to perform certain activities of daily living.
A care management and referral service will recommend or arrange the most appropriate level of care, whether at home or in a facility, and a percentage of the associated costs are reimbursed, up to a specified daily maximum.
The challenge is that Canadian carriers do not offer group long-term care insurance (though it is offered in the United States), and few offer it on an individual basis. It is therefore not surprising that only 12 per cent of respondents to the Flex-ability survey (those with flex plans or expecting to introduce flex in the next two years) indicated that long-term care insurance was currently part of the benefit program. However, with the changing demographics of the workforce, insurers may see an increased demand for group coverage.
•Critical illness insurance: Critical illness policies pay a lump sum on the diagnosis of certain well-defined and specific illnesses or conditions, such as heart attacks or cancer. Critical illness is not disability insurance, as it isn’t based on a person’s inability to work and doesn’t replace lost income. The intent of the coverage is to offset the added expenses that surviving with such an illness or condition presents, like hospital beds or home renovations to accommodate wheelchair ramps.
While critical illness coverage is receiving more attention, it was offered by less than 10 per cent of organizations responding to the Flex-ability survey, primarily due to the expense. With the aging of the workforce, one might expect to see critical illness coverage in more benefit plans, funded, perhaps, by cost-sharing.
•Wellness programs: According to the findings from the Aventis survey, 39 per cent of plan members receive health education from their employers. Where health education initiatives are in place, most plan members take advantage of such opportunities (70 per cent) and indicate that they are satisfied with their benefit plan (68 per cent).
The survey revealed that preventive health-care information is most popular with “middle-aged” employees — those in the 35 to 54 age group — although 63 per cent in the 55-and-older category also reported using health-care information.
Adjusting existing benefits
Even if employers don’t add new benefits, there’s a need to determine whether an older workforce is eligible for continued coverage under current plan provisions.
For example, providing disability benefits is a challenge for employers with workers aged 65 and older. Like disability benefits under the Canada Pension Plan, long-term disability coverage typically ceases at age 65.
In the U.S., insurers must provide long-term disability coverage beyond age 65, so it is possible Canadian carriers will look at this as an opportunity to expand their business by offering coverage after age 65.
Group life insurance plans also often cease coverage at age 65, though some plans offer benefits to age 70. It remains to be seen whether both government-provided benefits and group insurance coverage will be modified to accommodate an aging workforce.
For older workers, flexible work arrangements and other work-life benefits can play a crucial part in maintaining active employment. Although flexibility is not always possible, in some cases it could be more desirable to accommodate an employee’s wish for more time off than to lose the employee altogether.
Flexible hours, shortened work weeks, phased retirement and telecommuting should be considered.
Job-sharing arrangements, perhaps even on a seasonal basis, to accommodate the employee’s desire for a lengthy winter vacation or a prolonged cottage stay each year, may appeal to an older worker.
Continued benefit coverage for older workers who move to part-time or flexible arrangements will have an impact on benefit costs. For employers hard-pressed to avert a workplace numbers and skills crunch, an increase will be worthwhile.
Certain employees will be persuaded to stay on — perhaps in a phased retirement capacity — because of the opportunity for ongoing coverage. In this case, it is essential for employers to ensure that benefit programs reinforce staffing goals, and that benefits are available to older workers who continue in a less-than-full-time role.
Another option: those companies that offer post-retirement benefits can encourage key workers to retire and return on contract, without benefit coverage. They’ll still have coverage through the retiree benefit plan.
What about costs?
Certain benefit costs will increase as the workforce ages. Premiums for some benefits, like life insurance, are higher with age. On the other hand, there may be some savings to be had. For example, most drug costs for people 65 or older are covered by provincial health plans. But given that provincial government plans are getting more and more restrictive, the savings as employees age may not be as large as they once were.
The overall effect on total benefits costs will depend in part on whether a company provides post-retirement benefits. If it does, the aging workforce will simply shift some costs from the retiree plans to the active employee plans.
If it doesn’t, then overall costs will likely increase due to the fact that more older workers have chronic health conditions. However, this increase in benefits costs will likely be much less than the cost of recruiting and training new employees.
Business decision-makers have various options when it comes to paying for higher benefit costs associated with older workers.
They can certainly absorb the cost increase. However, they could also invoke some cost-containment measures, perhaps by improving employee communication around the plan, introducing formularies and generic substitution, or setting up health-care expense accounts for employees.
Cost-sharing may also not be as tough a sell as employers imagine.
In the Aventis survey, 50 per cent of plan members polled stated they would pay higher premiums to maintain their benefit coverage if the employer was unwilling or unable to cover rising health costs. As a last alternative — one that likely won’t help with attraction and retention challenges — employers could eliminate cost increases by providing only what current benefit expenditures can afford to buy.
Changing demographics will require a change in approach to benefit plan design and funding. Employers should begin to plan for the aging workforce by reviewing benefit plans and considering what modifications will be needed to attract, retain and accommodate older employees.
Sarah Beech is Hewitt Associates’ Eastern Canada benefits practice leader. She can be contacted at (416) 225-5001 or [email protected].
Not all workers will be older and not all older workers will be alike, so a total revamp of the benefits plan is neither desirable nor advisable. Many workers age 55 or older, for example, will still have young children. Thus, dependent coverage and benefits like RESPs continue to be important for many older — as well as younger — workers.
Other older workers will have empty nests and paid-off mortgages. For them, personal benefits and options for time off may appeal more.
One way to meet these disparate interests is to offer a flexible benefits plan. In the right circumstances, “flex” should make it easier to accommodate the needs of employees as they change over the years. However, employers should also consider adding some new options to their benefit plans to meet the needs of older workers.
Benefit choices for older workers
What new benefits might employers consider adding, whether within a flexible or traditional benefits plan? There are several options.
•Elder-care benefits: As they have typically been offered in Canada, elder-care benefits tend to cover information and referral services (available through the company employee assistance program), but not the cost of adult care (whether at home or elsewhere).
In Hewitt’s 2002 survey, Flex-ability: Employer attitudes toward flexible benefits, two-thirds of respondents indicated that they did not expect to add elder-care services as a benefit, whether as part of a flex plan or otherwise.
If employees are going to work past retirement age, and therefore have limited time to care for elderly parents, employers may want to reconsider adding elder-care services to the benefit plan.
•Home health care: Home health care could well be an attractive benefit to more than just older workers, but will hold a special appeal for members of the “sandwich generation” who are looking after parents, spouses and possibly children who need medical assistance but who aren’t hospitalized.
Home health-care services can cover respite, palliative and personal care, as well as unskilled nursing for individuals recovering at home. For a relatively small investment, employers may find that offering home health care as a benefit gets a lot of bang for the buck. The 2003 edition of The Aventis Healthcare Survey reports that 32 per cent of respondents said concern over the health and well-being of their family was negatively affecting productivity.
•Long-term care insurance: Since provincially sponsored long-term care coverage is limited, older employees might find this benefit particularly attractive. Benefits are provided when individuals are unable to perform certain activities of daily living.
A care management and referral service will recommend or arrange the most appropriate level of care, whether at home or in a facility, and a percentage of the associated costs are reimbursed, up to a specified daily maximum.
The challenge is that Canadian carriers do not offer group long-term care insurance (though it is offered in the United States), and few offer it on an individual basis. It is therefore not surprising that only 12 per cent of respondents to the Flex-ability survey (those with flex plans or expecting to introduce flex in the next two years) indicated that long-term care insurance was currently part of the benefit program. However, with the changing demographics of the workforce, insurers may see an increased demand for group coverage.
•Critical illness insurance: Critical illness policies pay a lump sum on the diagnosis of certain well-defined and specific illnesses or conditions, such as heart attacks or cancer. Critical illness is not disability insurance, as it isn’t based on a person’s inability to work and doesn’t replace lost income. The intent of the coverage is to offset the added expenses that surviving with such an illness or condition presents, like hospital beds or home renovations to accommodate wheelchair ramps.
While critical illness coverage is receiving more attention, it was offered by less than 10 per cent of organizations responding to the Flex-ability survey, primarily due to the expense. With the aging of the workforce, one might expect to see critical illness coverage in more benefit plans, funded, perhaps, by cost-sharing.
•Wellness programs: According to the findings from the Aventis survey, 39 per cent of plan members receive health education from their employers. Where health education initiatives are in place, most plan members take advantage of such opportunities (70 per cent) and indicate that they are satisfied with their benefit plan (68 per cent).
The survey revealed that preventive health-care information is most popular with “middle-aged” employees — those in the 35 to 54 age group — although 63 per cent in the 55-and-older category also reported using health-care information.
Adjusting existing benefits
Even if employers don’t add new benefits, there’s a need to determine whether an older workforce is eligible for continued coverage under current plan provisions.
For example, providing disability benefits is a challenge for employers with workers aged 65 and older. Like disability benefits under the Canada Pension Plan, long-term disability coverage typically ceases at age 65.
In the U.S., insurers must provide long-term disability coverage beyond age 65, so it is possible Canadian carriers will look at this as an opportunity to expand their business by offering coverage after age 65.
Group life insurance plans also often cease coverage at age 65, though some plans offer benefits to age 70. It remains to be seen whether both government-provided benefits and group insurance coverage will be modified to accommodate an aging workforce.
For older workers, flexible work arrangements and other work-life benefits can play a crucial part in maintaining active employment. Although flexibility is not always possible, in some cases it could be more desirable to accommodate an employee’s wish for more time off than to lose the employee altogether.
Flexible hours, shortened work weeks, phased retirement and telecommuting should be considered.
Job-sharing arrangements, perhaps even on a seasonal basis, to accommodate the employee’s desire for a lengthy winter vacation or a prolonged cottage stay each year, may appeal to an older worker.
Continued benefit coverage for older workers who move to part-time or flexible arrangements will have an impact on benefit costs. For employers hard-pressed to avert a workplace numbers and skills crunch, an increase will be worthwhile.
Certain employees will be persuaded to stay on — perhaps in a phased retirement capacity — because of the opportunity for ongoing coverage. In this case, it is essential for employers to ensure that benefit programs reinforce staffing goals, and that benefits are available to older workers who continue in a less-than-full-time role.
Another option: those companies that offer post-retirement benefits can encourage key workers to retire and return on contract, without benefit coverage. They’ll still have coverage through the retiree benefit plan.
What about costs?
Certain benefit costs will increase as the workforce ages. Premiums for some benefits, like life insurance, are higher with age. On the other hand, there may be some savings to be had. For example, most drug costs for people 65 or older are covered by provincial health plans. But given that provincial government plans are getting more and more restrictive, the savings as employees age may not be as large as they once were.
The overall effect on total benefits costs will depend in part on whether a company provides post-retirement benefits. If it does, the aging workforce will simply shift some costs from the retiree plans to the active employee plans.
If it doesn’t, then overall costs will likely increase due to the fact that more older workers have chronic health conditions. However, this increase in benefits costs will likely be much less than the cost of recruiting and training new employees.
Business decision-makers have various options when it comes to paying for higher benefit costs associated with older workers.
They can certainly absorb the cost increase. However, they could also invoke some cost-containment measures, perhaps by improving employee communication around the plan, introducing formularies and generic substitution, or setting up health-care expense accounts for employees.
Cost-sharing may also not be as tough a sell as employers imagine.
In the Aventis survey, 50 per cent of plan members polled stated they would pay higher premiums to maintain their benefit coverage if the employer was unwilling or unable to cover rising health costs. As a last alternative — one that likely won’t help with attraction and retention challenges — employers could eliminate cost increases by providing only what current benefit expenditures can afford to buy.
Changing demographics will require a change in approach to benefit plan design and funding. Employers should begin to plan for the aging workforce by reviewing benefit plans and considering what modifications will be needed to attract, retain and accommodate older employees.
Sarah Beech is Hewitt Associates’ Eastern Canada benefits practice leader. She can be contacted at (416) 225-5001 or [email protected].
