What are the Benefits Options After an Employee Retires?

Sep 08, 2014

It wasn’t long ago that benefits for retired employees were a routine consideration for most large employers in Canada, and even for some in the small and medium employer landscape. Over time, however, more and more companies have discontinued, or are discontinuing the extension of health and dental benefits coverage for their retiring employees. There are various reasons for this trend, but the main one is the rising costs of benefits attributed to rising claims.

Retirement from an employer does not mean our medical needs retire as well. Our healthcare needs during retirement are actually greater, yet we spend little time thinking, saving or planning for those healthcare needs. Canadians spend about $15 billion a year on prescription drugs, about half of which are purchased by seniors as they are more likely to have chronic health problems that require regular medication.

Fortunately, the insurance market has created products that employees can take with them into their retirement. Almost every major insurance carrier in Canada has some form of “retiree” plan, such as CoverMe (Manulife), Plan Direct (Great-West Life), and Primary Blue (Pacific Blue Cross) to name a few. Most carriers have a strong online presence with the capability to obtain online quotes.

Of importance is that most of the options available do not mirror the programs in place with their employer. The vast array of options in these individual, retiree and conversion plans, as they are known, can be complex, confusing and costly. While there are some plans that may provide extended health and dental coverage without medical underwriting (guaranteed issue), others require evidence of good or satisfactory health. As well, unlike group insurance, the cost and type of coverage are be limited by the individual’s health status or medications they are currently taking.

There may also be time limitations for application, especially in the guaranteed issue products. Depending on the plan, the time frame is anywhere from 30 to 60 days from when their group coverage ceases. The retiree needs to give thorough consideration to what benefits are really important and what they can afford.

As with most insurance products, assistance from an advisor is beneficial. In fact, the first place to start is simply understanding the need to plan early!

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