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Report To: Finance & Corporate Services Committee
Date of Meeting: January 29, 2007
Submitted By: Ita Magid
Prepared By: Ita Magid
Ward(s) Involved:
Date of Report: January 23, 2007
Report No.: CAO-07-002
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 continue for employees after the age of 65 under a new
benefit package as outlined in the attached document, (Table #2, Option #1).
BACKGROUND:
City Council at its regular meeting held on Monday, December 18, 2006 passed the following
resolution:
"That notwithstanding Council's resolution of September 25, 2006 staff report to the
January 29, 2007 Finance and Corporate Services Committee meeting on the principle
of providing benefits to employee age 65 and over, based on the premise that such
employees shall be in the same position of coverage as at prior to age 65; as it relates to
Chief Administrator's Office report CAO-06-052 (End of Mandatory Retirement) and
addendum report CAO-06-056."
REPORT:
On December 12, 2006, Bill 211 was passed eliminating mandatory retirement and created a
great deal of discussion regarding the provision of benefits to employees 65 years and older
remaining in the workforce.
A survey conducted by the Ontario Municipal Human Resources Association (OMHRA) in the
latter part of 2006 revealed that 39.1% of municipalities were committed to provide benefits to
employees past the age of 65 while 43.5% chose not to provide any benefits and 17.4% of the
municipalities surveyed were undecided.
Based on discussions with other municipalities and our Insurance carrier we find that there are
four distinct options dealing with the provision of benefits. Please see Table #1
The Cities of Toronto, Hamilton, Ottawa, London and the Region of Durham chose to develop a
basic benefit plan for their 65 year and older workforce. The Region of Waterloo is considering a
cash payout based on a percentage of an employee's earnings in lieu of benefits. The Region
of York and The City of Windsor have proposed a fixed annual payout of $3000 and $2500
respectively. These amounts are based on their benefits utilization rates. Cities which have
chosen not to provide any benefits at this time for employees remaining in the workforce after
age 65 are the Cities of Cambridge, Guelph, Brantford and Stratford.
Three of the four options mentioned above are outlined in Table #2; development of a basic
benefit plan, cash payout based on a percentage of earnings and a flat amount based on the
current benefits utilization rate, populated with City of Kitchener information as follows:
Option #1 reflects the creation of a new benefits group that includes a revised set of benefits. In
particular Life Insurance has been set at a flat amount, Extended Health Care does not include
drug coverage making the Ontario Drug Benefit the first payor; and Dental Benefits consist of a
basic dental plan. Our Insurance carrier has advised us that carriers are not prepared to provide
Long Term Disability coverage past age 65. Participation in the sick leave, vacation and
OMERS plans would continue.
Option #2 reflects the alternative of a monetary payout based on a percentage of an employee's
annual income in lieu of benefits. (We have used an average annual income of $56,140). This
option would not provide a provision for premium based benefits, however, participation in the
sick leave, vacation and OMERS plans would continue. Although we had considered this option,
we no longer consider it to be viable since it would be based on employees' salaries thereby
making it inequitable.
Option #3 reflects the alternative of a flat monetary amount based on our current benefits
utilization rate. Participation in the sick leave, vacation and OMERS plans would continue.
The new benefits package (Option #1) was designed to provide a basic benefit package to
employees but also be cost effective to the Corporation.
The rationale for providing a basic benefit package is based on the following:
• The Ontario Drug Benefit covers the cost of most prescription drugs
• Dental coverage past age 65 can be expensive as there is a higher utilization of the
more expensive procedures (major restorative)
• Providing life insurance past age 65 becomes more expensive
Currently the Corporation has in excess of 56 part-time employees older that 65 and our
projections show that by 2011 there will be 28 full-time employees reaching the age of 65 who
may choose to remain in the workforce. Since the trend already exists to stay in the workforce
past the age of 65, we can anticipate this trend gaining momentum.
FINANCIAL IMPLICATIONS:
The new benefits package (Option #1) is modelled after our current benefit structure but with a
net saving of approximately $1400 per employee per year. Given the fact that we will have 28
employees reaching the age of 65 by 2011, the savings could increase substantially.
CONCLUSION:
Employees remaining in the workforce past the age of 65 should have some level of benefit
coverage to ensure their health and wellness. As Council has indicated previously, providing
benefits for employees past age 65 would also show the Corporation's appreciation to these
committed employees. Furthermore it is our belief that monies paid out in lieu of benefits will not
necessarily address our objective of employee health and wellness and therefore do not
endorse this option. It is our opinion that a revised benefit package (option #1) be adopted for
those employees remaining in the workforce past age 65.
In addition, having a benefits plan in place for future employees who are over age 65 may prove
to be a useful recruitment tool.
Ita Magid, Supervisor of Benefit Development
Cc Carla Ladd
Doug Paterson
Lesley Bansen
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