HomeMy WebLinkAboutCAO-06-056 - Addendum to Report CAO-06-052 End of Mandatory Retirement~~.
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TC NE ~~
Chief Administratar`s
Office
Report To: Mayor C. Zehr and Members of Council
Date of Meeting: September 18, 2006
Submitted By: Doug Paterson
Prepared By: Doug Paterson
Ward(s) Involved: n/a
Date of Report: September 11, 2006
Report No.: CAO-06-056
Subject: ADDENDUM TO REPORT CAO-06-052 END OF
MANDATORY RETIREMENT
RECOMMENDATION:
For Council's consideration.
REPORT:
At the September 5 meeting of Finance and Corporate Services, Committee considered a report
entitled End of Mandatory Retirement (CAO-06-052). Committee resolved as follows:
"That consideration of Chief Administrative Officer report CAO-06-052 (End of
Mandatory Retirement) be deferred to the Finance and Corporate Services
Committee meeting of September 18, 2006, at which time staff report on the best way
for the City to deal with insured benefits for employees beyond age 65."
Staff recommended that Council adopt the position of not providing benefits to employees
working beyond age 65. Staff further recommended if Council wished to recognize ongoing
benefit costs for employees working beyond age 65, that should be expressed in a percentage
in lieu of benefits.
During the discussion at Committee, a further suggestion of a fixed dollar amount in lieu of
benefits was identified as a potential viable option. To investigate the various options, staff
approached the matter on the following basis:
1. We examined two existing plans available for post age 65 employees.
a. Municipal Retirees Organization Ontario (MROO)
b. Manulife's "Follow Me" program.
Both plans provide extended health care (EHC) benefits as well as dental benefits.
Neither plan provides long term disability or life Insurance.
The cost per month for MROO is $235.65. For Manulife's "Follow Me" program, the cost
is $144.20 for age 65-69, and increases to $173.10 age 70-79. (All costs quoted are for
a family plan.)
Note: The difference in cost between the two plans is probably attributable to details of
plan design which we have not investigated.
2. Utilizing the City's average group premiums for these same two benefits, our costs are
as follows:
Extended health care
Dental
Per month Total: $283
Note: Our average costs are higher in part because we do not have any offset for the
Ontario Drug Benefit that is available to those over 65.
3. To provide the same level of insurance coverage (2 x annual salary) currently enjoyed
by staff whose age is less than 65, would be prohibitively expensive. As an example, in
the case of a male employee, whose age is 65, with the City's average yearly salary of
$56,140 at twice his salary, $113,000 worth of life insurance would generate a monthly
premium of $875.
4. Utilizing an average salary of $56,140, the City's average group premium cost of $283
per month (#3 above) is the equivalent of 6% of earnings.
CONCLUSION
The calculation of $283 per month, or 6% of earnings, which would be subject to tax, would
approximate the cost of private insurance for extended health care and dental coverage. Long
term disability is unavailable and comparable life insurance is prohibitively expensive.
Respectfully submitted,
Doug Paterson, Director of Human Resources
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TC NE ~~
Chief Administratar`s
Office
Report To: Finance & Corporate Services Committee
Date of Meeting: September 5, 2006
Submitted By: Doug Paterson
Prepared By: Doug Paterson
Ward(s) Involved: n/a
Date of Report: August 23, 2006
Report No.: CAO-06-052
Subject: END OF MANDATORY RETIREMENT
RECOMMENDATION:
That Human Resource Policy II-250, Retirement, and Policy II-145, Group Insurance and
Pension Plans, be amended as suggested; and,
That employees who work beyond age 65 continue to accrue service for vacation purposes, sick
leave and vacation, in the same manner as employees under the age of 65; and further,
That premium based insurance benefits cease for employees after the normal retirement age of
65.
REPORT:
In May of this year, I tabled a "for information" report (copy attached) with the Finance &
Corporate Services Committee, listing the implications of ending mandatory retirement, which is
effective December 12, 2006. This report now identifies the changes and decisions that need to
be made for implementation later this year.
The following changes need to be addressed:
1. Policy -Two policies are affected by ending mandatory retirement. The first is Policy
11250 Retirement. The proposed changes eliminate what would previously have been
called "compulsory" retirement. It is recommended that normal retirement be retained
within the policy and there are two approaches in the draft revision that can be
contemplated.
The first, which was indeed the original policy definition, defines normal retirement age
as the end of the month in which the employee reaches the age 65. The second defines
normal retirement as the end of the calendar half-year in which the employee reaches
the age 65, and is the definition that previously defined "compulsory retirement". The
definition of the calendar half-year is a unique approach that this Corporation has taken
for at least the past 25 years and is not the definition one would normally expect to
encounter in areas such as Canada Pension Plan, WSIB, Ontario Health Benefits
coverage and Old Age Security.
The second policy is Policy II-145 Group Insurance and Pension Plans. The only change
is found on the second page, which describes when LTD recipients cease to have
benefits as outlined in the policy.
2. Service Dates - It is recommended that employees who continue to work beyond age 65
continue to accrue service for vacation purposes without interruption. Note that seniority
under collective agreement is within the purview of the respective bargaining units and
the Corporation can reasonably anticipate that unions will mirror the position
recommended on service.
3. Sick Leave - It is recommended that sick leave continues for employees working beyond
65 in the same manner as it currently applies to employees under age 65. That is, the
employee would continue to accrue sick leave and could draw from the accumulated
bank until actual retirement. With respect to the gratuity payment, the current by-law
provides for retirement post age 65 and therefore, it is recommended that the gratuity
payment coincide with the point at which the employee actually retires from the
Corporation.
4. Vacation - It is recommended that vacation continue to accrue and be utilized in the
same manner as for employees under age 65.
5. Benefits - It is recommended that insurance benefits cease for employees after normal
retirement. This includes extended health care, dental, group life and long term disability
which are premium-based benefits.
This position is recommended for the following reasons:
• The Ontario Drug Benefit program covers the cost of most prescription drugs for
individuals who have reached 65;
• Post age-65 extended health care plans are extremely costly, with escalating costs
regardless of changes in plan design;
• Retiree dental coverage can be expensive as there is higher utilization of the more
expensive procedures (eg: bridges, crowns);
• The City's Administrative Services Only (ASO) agreement with the insurer renders us
responsible for the claim costs under Extended Health Care and Dental plans, as
well as for an administration fee. As the workforce ages, utilization increases under
these plans will result in additional costs;
• Providing life insurance post 65 becomes more expensive as the mortality risk is
greater; and,
• Cost of disability claims coverage, both liability and premiums, will increase.
Should the Corporation wish to consider some form of extension of benefits to
employees 65 or older, it is recommended that the Corporation consider providing a
percentage on top of salary in lieu of benefits.
Respectfully submitted,
Doug Paterson
Director, Human Resources