June 6, 2018

New Ontario Human Rights Tribunal ruling: Benefits ending at 65 deemed discriminatory

June 6, 2018

The Ontario Human Rights Tribunal recently sided with a teacher who claimed that his health benefits ending at age 65 was deemed discriminatory due to age. This ruling is significant for employers and benefit plan custodians to watch, as it is appealed further and potentially precedent-setting.While there are no immediate actions required by employers, here is Beneplan's interpretation:

  • A benefit plan is a privilege, not an entitlement;
  • However, its administration must be universal and free from discrimination on the grounds of the Charter and Labour Codes.
  • It is an employer's choice of how long to extend a benefit plan, and may choose a termination age that matches their tolerance for premiums. This is also balanced with the risk ceiling that their insurance company will underwrite.
  • The older the age of termination, the more premiums an employer would have to pay. If employees contribute to this plan, it also affects the premiums that employees pay.
  • Insurers typically have a maximum age of coverage, such as 70 or 75, and may make exceptions to continue coverage to "death", "retirement," or "age 99," depending upon the situation. However, any age of termination above their standard must be underwritten as a separate and unique risk.
  • Beneplan has seen some employers choose to extend coverage to age 80, 85, 99, or 'retirement,' depending upon:
  • The occupation class ("This a key employee that we can't lose?")
  • The tenure or executive status ("The CEO is still working and the business needs her to be covered.")
  • The costs ("How much more will this cost us?")
  • How does this impact each benefit?
  • Group Life Insurance
  • The intent of Group Life Insurance is not to replace personal life insurance, which has different goals & needs from group.
  • The intent of Group Life is to cover employees who are actively at work on a full-time basis.
  • Insurers typically reduce coverage at age 65, 70, or 75 by 50% in order to mitigate risk, avoid anti-selection, and keep premium costs sustainable.
  • Group Short / Long Term Disability
  • The intent of group disability plans are not simply to pay an employee because they are disabled -- the intent is to primarily provide a wage-loss replacement insurance plan, as a result of total disability that restricts the employee from performing their own occupation.
  • If an employee is not likely to lose their income, why would they need to purchase insurance to replace their income?
  • At age 65, many Canadians typically become eligible and apply for government income benefits such as the CPP, OAS, or GIS. They may also have a savings or pension plan prepared to replace their income as their ability to work declines. Therefore, purchasing insurance for this age group was typically deemed unnecessary, redundant, and exceedingly expensive to the employee (who typically pay 100% of premiums) in proportion to their risk of losing income at age 65 or beyond.
  • Group Health Benefits
  • Many Canadians have provincial health insurance coverage which covers the cost of prescription drugs at the age of 65.
  • Drugs compose an average of 70% of the cost of a health plan.
  • Therefore, remaining benefits may include paramedicals (physiotherapy, chirporactic, etc), vision care, travel insurance, home nursing, and medical equipment.
  • Group Dental Benefits
  • Beneplan typically finds that employees over the age of 65 have proportionally fewer dental claims and needs than younger employees. The reasons behind this are:
  • Their dependent have typically grown up and are no longer part of the group plan;
  • At age 65, much of the dental work required is maintenance such as regular cleanings. Most of the major restorative work is typically done under age 65.
  • However, there is very little risk in extending a dental plan past age 65.

A summary of an interpretation from Sherrard Kuzz, Employment Lawyers:

  • "It remains to be seen whether this decision will be appealed or reviewed. Until then, the decision applies to any employer regulated provincially in Ontario, whose benefits coverage ceases for employees age 65 and older."
  • "Employers should therefore discuss with their insurance providers ways to continue extended health and dental coverage beyond age 65 and to provide modified life insurance coverage at a level that will not significantly impact plan costs.
  • "The insurance industry will also want to re-examine its programs and plans, and whether there is an age, beyond 65, at which there does exist an actuarial basis to deny coverage to an employee who elects to continue working beyond the traditional age of retirement. In the absence of this analysis, employers may have an uphill battle defending the cessation of benefits coverage after age 65 on the basis of “undue hardship”.

An interpretation from a Canadian insurance company:

  • "Member companies will be working with the Canadian Life and Health Insurance Association insurance industry association, regarding providing some direction for the industry in light of the decision. This is a very recent decision and will need some time to properly understand its implications and respond accordingly."

As individuals continue to work longer and past the previously assumed 'retirement age', insurers will have to keep an eye on this topic.For more information, please contact your Benefits advisor, or Beneplan at 1-800-387-1670.


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