By Bill Watt
The loss of one’s job is a difficult time for anyone. Along with losing their job the terminated employee is also losing their employer group benefits program.
Each province has legislation that establishes the minimum standards for the termination of employees, including what is defined as reasonable notice and the calculation of severance pay. In British Columbia this is outlined in the Employment Standards Act. Today, most employers utilize the services of labour lawyers to assist and advise them through the termination process. As well, in order to better manage severance situations many organizations have developed written policies outlining termination and severance details and include them in the document package an employee signs before commencing employment.
When preparing severance package employers sometimes offer an extension of benefits without reviewing this offer with their plan consultant. This can become awkward if the employee accepts a severance package that provides an extension of benefits in excess of what the insurer will provide. It is prudent for Employers to contact their plan consultant early in the severance planning process, to ensure that both the employer and their legal counsel understand what can be offered to a terminating employee.
When an employee is terminated, they have the option to convert some of their group coverage to individual coverage. For example, individual plans providing prescription drug, extended health care and dental benefits are available for purchase, and most importantly employees leaving a group plan normally do not have to provide additional medical evidence prior to enrollment. An employee and their spouse can convert up to a maximum $200,000 of their group and optional life insurance to individual policies, and some group insurance contracts offer terminating employees the option to convert all or part of their Long Term Disability insurance to an individual plan.
We recommend providing a departing plan member with a package that includes a letter outlining their benefit plan options and all of the information and enrollment forms necessary to help them make a decision and enroll in the plans best suited for their circumstances.