TORONTO, ON--(Marketwired - August 27, 2014) - Non-pension retiree benefits such as healthcare and dental coverage can be an important factor in helping employers attract and retain talent. But almost half of Canadian employers do not offer any non-pension retiree benefits at all, while many of those who do are not fully considering options that can make retiree health benefits more affordable, according to a new survey by Aon Hewitt, the global human resources solutions business of Aon plc (NYSE: AON).
Retiree health benefits, which may include medical, dental and private nursing coverage into retirement, present challenges to companies who have to balance employee needs against escalating costs to employers. In Aon Hewitt's survey of 225 Canadian employers, 44% of the respondents do not offer any retiree benefits at all, while another 10% have closed their existing programs to future retirees. Of those employers not offering retiree benefits, the most often-stated reason (76%) was "high costs compared to perceived benefit to employees," while 66% blame rising healthcare costs specifically. However, about 20% of respondents say that they would consider offering retiree health benefits such as drug, hospital and dental benefits if the costs were fully or partially paid by retirees.
"With about half of employers not offering retiree health benefits, the challenge is finding ways to make these programs affordable for more people," noted Greg Durant, Senior Vice-President and Chief Actuary, Health & Benefits Practice at Aon Hewitt. "But these results also clearly show that many employers who don't currently offer retiree benefits would consider doing so if retirees shared the cost burden. Retirees would benefit as well, by realizing the cost-savings of purchasing coverage in a group context rather than individually."
Among the 56% of companies surveyed who do offer retiree benefits, 85% offer retiree medical coverage and 82% offer hospitalization. The costs of those programs are shared by employer and employee in about half of companies surveyed. Asked for the likelihood of modifying their current plans, 38% say they were likely to increase retiree contributions and 31% say they were likely to reduce or eliminate eligibility for future retirees; only 8% say they were likely to improve benefits for current or future retirees.
Meanwhile, however, a large number of respondents offering retiree benefits are unaware or have not considered a number of planning options that can help make the programs more affordable. More than 85% had not considered or were unaware of alternative financing vehicles, while many (81%) had not considered a "lump sum" buyout settlement to current retirees or moving to a defined contribution retiree medical plan (73%).
"With more than a third of companies looking at reducing or eliminating future retiree benefit eligibility, there is clearly a desire to keep escalating costs in check," said Durant. "But it's also clear that few employers are aware of or fully considering alternative planning options that can help to make retiree health benefits more cost-efficient. As employers try to balance cost containment with recruitment imperatives, it only makes sense for them to get informed and consider all of their options -- because options do exist."
About Aon Hewitt
Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information on Aon Hewitt, please visit www.aonhewitt.com.
Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon's global partnership with Manchester United.
Sign up for News Alerts: aon.mediaroom.com
Follow Aon Hewitt on Twitter @aonhewittCA