People are increasingly working beyond the traditional “retirement age”. With employees staying on as they get older, many business owners aren’t sure about the rules for their benefits plans. In fact, since many traditional benefits plans terminate at age 70, most business owners believe that they cannot offer benefits for their employees who are over 70.
We’re here to tell you that you can offer benefits to employees over 70 – with some clever plan design, you can provide your oldest employees with benefits while carefully mitigating the risks of doing so.
Possible Solutions
Maintain Health and Dental Coverage
Health and dental coverage can be extended, allowing employees (or executives) to keep their benefits after the age of 70.
Although you may think it would be very expensive to provide benefits to an employee over 70, whose health costs will likely increase, keep in mind that (in Ontario) ODB covers a large chunk of drug claims. That said, employees over 70 will certainly have a greater risk of a large hospital or nursing care claim. To mitigate any increased risk, you can introduce restrictions on the existing plan design.
It is important to know that employees over 70 may lose most of their pooled coverage, such as Life Insurance or Critical Illness. They will keep Stop Loss Insurance and Out of Country (OOC), but the OOC rates will increase and a stability clause will be introduced when they travel.
Healthcare Spending Account
A healthcare spending account (HSA) can be added to your employee benefits plan without altering your existing plan (unless you want to be creative with your benefits plan, in which case there are lots of ways an HSA can complement your plan and align with your compensation philosophy!).
At its core, an HSA is a pool of money available to your employee and their family, which the employer funds monthly throughout the year. As the business owner, you can have complete control over how much you spend on the HSA, while your employee has the flexibility to use the HSA funds on any CRA approved expense.
With an HSA, your plan will be protected from huge claims because these employees will have access to a maximum amount of funds within the HSA. If your plan includes Stop Loss insurance, this can be maintained beyond age 70 in order to protect the employee as well.
Important Insurance Considerations
To meet the trend of people working later into life, some insurers are beginning to extend pooled coverage that used to cut off at age 65 or 70, such as Life/Accidental Death and Dismemberment, Critical Illness, and Long Term Disability.
If you have insurance components of your plan that cover people beyond age 70, it’s important to note that they must be working the requisite hours in order to successfully claim. For example, business owners or former business owners over 70 often remain somewhat involved with the company and stay on the benefits plan – perhaps they come into the office for a few hours per week or call in from their summer home. However, if they are not putting in the required hours, the insurance company will likely find out during the adjudication process and they will be denied coverage.
Creative Benefit Plan Design
A benefits plan does not need to be a simple off-the-shelf solution! There are lots of ways to customize every benefits plan to meet each employer’s needs. Whether you want to accommodate employees over 70, retain your millennial employees, or reward specific employees (for meeting sales goals, seniority, longevity, etc.), you can build a benefits plan to match.
The Benefits Trust helps successful business owners build a better benefits plan than they can get anywhere else. Get in touch with us today!
Watch our video about HCSAs for a deeper understanding of how they work!
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