Group Benefits

Importance of Benefit Plans Increases

A recent pair of surveys indicates the growing importance of benefit plans in a total compensation package.

In a Bank of Canada survey, there were two points that highlight the fact this is a tight labour market:

1. Although workers anticipate significant price increases in the near term, they believe their wages will increase only modestly.
   This is a source of dissatisfaction for them
2. Workers expectations for voluntarily leaving their job have increased to a survey high, suggesting a healthy labour market churn ahead

A RBC Insurance survey found 73 per cent of Canadians aged 18 to 34 and 69 per cent of 35 to 44 year-olds are more likely to leave their current employer for another that is offering better benefits.

The scope of what constitutes “benefits” is changing as a result and now flex hours, personal spending accounts, health care spending accounts and wellness plans (that address physical, mental and financial issues) are increasing in popularity.

Eligibility Rules Changing

Some Canadian benefit insurers allowed employers to extend benefit coverage during the COVID pandemic for employees on reduced hours. This exception to the standard eligibility rules allowed employees to continue to access their benefits however many insurers have now, or plan to soon, revert to the standard contractual requirements for an employee to be eligible which typically is 35 to 40 hours per week.

Plan sponsors should check with their insurer to ensure no employees are caught short if there isn’t adequate notice provided of such a change.

Drug Plans – Claims Down but Costs Up

The annual drug trends report by Telus Health found 56 per cent of plan members made a claim in 2021 compared to 62 per cent in 2019.

However the average eligible amount per claim increased by 9 per cent from $77 in 2020 to $84 in 2021 which is significantly above growth rates in the prior four years.

The report attributed these cost increases to specialty drugs, noting 2 per cent of all claimants submitted eligible amounts totalling more than $10,000, accounting for 40 per cent of the total eligible amount for all claimants.

In 2021, 55 per cent of private drug plans had mandatory generic substitution policies which is down from 56 per cent in each of 2020 and 2019. Generic prescription drugs accounted for 66 per cent of claims compared to 64 per cent in 2020.

Diabetes drugs accounted for 12 per cent of eligible drug costs and approximately 8 per cent of claims and the report notes this category is projected to surpass rheumatoid arthritis (currently 12.6 per cent) as the top drug category due to increased utilization of higher cost treatments.

Group Savings

Participation in Pension Plans Grows

Statistics Canada reports that active members in a registered pension plan (RPP) increased by 0.9 per cent in 2020. Increases in membership were largest in Quebec (33,000), followed by Ontario (25,200) and British Columbia (16,800).

Membership changes are best viewed in light of changes in the labour market due to the pandemic which boosted employment in some sectors, such as public services, as well as the decline in resource prices which affected employment in Alberta (decreases of 23,400 in RPPs) and Newfoundland & Labrador (decreases of 3,500).

Women accounted for just over three-quarters of the increase in new membership which is a trend that started in 2016 and has increased in every year since then.

New Guidelines for Auto-Features

The Canadian Association of Pension Supervisory Authorities has updated the guidelines so capital accumulation pension plan (CAP) sponsors can consider adding automatic features to their plans (refer to Guideline No. 3 – Guidelines for Capital Accumulation Plans (CAPs)).

These guidelines replace those from 2004 and suggest several areas where they can have an impact including increased participation, earlier and greater contributions as well as appropriate investment selection – all of which may lead to more positive plan member outcomes. These features may be combined and include automatic enrolment, automatic increases in CAP member contributions, automatic rebalancing of investments, electronic communication, default investment options, and default elections at termination of employment and retirement.

The automatic features within the CAP should be disclosed to the members upon enrolment in, or amendment to, the plan with the ability to opt out if applicable.

Commuted Value Interest Rate Assumptions

The interest assumptions required to calculate commuted values and marriage breakdown values for an event which occurs in any month up to and including July 2022 are now available at www.an-actual-actuary.com.

There are several Excel spreadsheets available at www.an-actual-actuary.com.