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Home My WebLink AboutCAO-07-017 - Elimination of Mandatory Retirement__,~ .,.,„ .w~, ~! f f r~~/ VN.:~rf~! dr1~IJ fl: ~'4'9' ~ldl ,J~ ~~IC;~ REPORT Report To: Financial & Corporate Services Committee Date of Meeting: Submitted By: Prepared By: Ward(s~ Involved: Date of Report: Report No.: April 2, 2007 Ita Magid Ita Magid March 28, 2007 CAO-07-017 Subject: Elimination of Mandatory Retirement RECOMMENDATION: That Human Resources Policy II-250, Retirement and Human Resources 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, and sick leave, in the same manner as employees under the age of 65; and further, That premium based insurance benefits continue for employees who continue to work after the age of 65 under a new benefit program. BACKGROUND: At its regular meeting held on Monday, March 19, 2007 City Council passed the following resolution: "That notwithstanding Council's resolution of February 5, 2007, the recommendations contained in Chief Administrator's Office Report CAO-07-002 (End of Mandatory Retirement} be deferred to the April 2, 2007 Finance & Corporate Service Committee meeting, pending further review by staff as to the feasibility of providing a spending account similar to senior management for those employees who choose to work beyond age 65." REPORT: After having reviewed the feasibility of implementing a spending account for employees continuing to work past age 65, the following has been determined: Advantages The City of Kitchener's annual financial liability would be defined as it would be pre- determined by the dollar value established by the Corporation. Provides employees working beyond age 65 with the potential to choose from a broader range of benefits as opposed to employees who are younger than 65 and are covered by a defined benefit plan. Disadvantages Creates two levels of benefits, spending account versus defined benefit plan, in the same bargaining unit. • Education on spending accounts may be cumbersome based on past experience (IBEW 636) Experience of group reflects on Corporation's rates thereby impacting the City's future financial liability Based on the aforementioned, we do not recommend a spending account for employees working beyond age 65. Thus far, we have explored a variety of benefit plan alternatives (see attached chart} and today we addressed the feasibility of establishing a spending account. A new option has become available and we believe that this is a viable alternative. The Municipal Retirees Organization of Ontario ~MROO} currently extends benefits to reti_ who lose their benefits from their current employer. Effective February 1, 2007 MROO is offering benefits to those employees continuing to work past age 65. MROO is anon-profit organization with a membership of 15,000 that has offered Retiree Benefits since 1984. MROO is recognized and endorsed by various associations such as the Association of Municipal Managers, Clerks and Treasurers of Ontario; Canadian Union of Public Employees; to name a few. Representatives from Encon Group Inc. which is the program manager for MROO's insurance program recently met with us to discuss their benefit programs offered to employees working beyond age 65 Advantages: Group's experience does not impact Corporation's insurance rates Extension of benefits to employees working past age 65 through MROO would be seamless and they then have the option to maintain or reduce the level of benefits upon retirement. Life rates will not change and are fixed at entry age. At age 90, the policy is considered "paid-up", no more premium is collected and coverage remains in force. The Health and Dental plans are subject to change annually at January 1 with the Board's approval, but there are no "age-banded" increases. No medical evidence/questionnaire is required as long as employee signs up within a 90 day period following loss of benefits. Board reviews benefits every January. Benefits are not driven by profits. The Board is elected every 3 years at local zone meetings. There are currently nine zones in the province and local members are nominated and elected. Two members of the Board are also currently retired OMERS pensioners. Disadvantages The level of benefits offered through MROO varies somewhat from the benefits currently offered to staff. For example, MROO offers up to $5000 per calendar year for medical supplies and prostheses, and up to $850 per calendar year and $25000 over a lifetime for prescription drugs and medicine. The existing plan for full-time employees does not have any limitations Travel insurance can be purchased but the individual must do so on their own as it is based on individual needs and age. The maximum payable for Dental; both basic and major restorative services combined is $1000 per insured per calendar year. The existing basic dental plan for full-time employees has no limitations other than the current Ontario Dental Fee Guide. Life insurance is capped at $20,000. The existing plan for full-time employees is based on 2 x their annual salary. FINANCIAL IMPLICATIONS: From a financial point of view, the cost of benefits purchased through MROO would be at par with current benefit costs. It would cost the Corporation approximately $4000 a year to provide MROO's top of the line benefits including Extended Health Care, Dental, Semi-private hospital and Life Insurance x$20,000) coverage as compared to our current utilization rate of $3,757. CONCLUSION: For the advantages noted above, I believe that the MROO option is the best choice of offering benefits for employees working beyond age 65. 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