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Canada retirement rule raises benefit questions

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TORONTO—An amendment to Ontario law that bars mandatory retirement at age 65 has spurred employers in the Canadian province to consider the viability of extending benefits to post-65 employees.

As of Dec. 12, an amendment to the Ontario Human Rights Code prohibits mandatory retirement except in specific situations where forced retirement could be justified due to the nature of the job.

For employers, major benefits questions related to the end of mandatory retirement arise in relation to health care, life insurance and disability benefits because most of those insurance plans terminate for employees at age 65, said Jolanta Morowicz, a lawyer for Mercer Human Resource Consulting in Toronto. Employers that want to extend benefits to employees beyond age 65 have to discuss this issue with their insurers and consider the costs of extending benefits, she said.

A recent study by Hewitt Associates Inc. found that the majority of employers either already offer the same medical and dental benefits or were willing to extend the same coverage to employees 65 and older (see box).

Ten percent of employers were willing to extend medical and dental coverage to post-65 employees with restrictions, such as ensuring that their benefit plans do not pay for prescription drug coverage that the government already provides to citizens 65 and older, said Linda Byron, a principal in Hewitt's Toronto office.

Employers, though, were less willing to extend other benefits to the post-65 employee group. For example, 81% were not planning to add long-term disability benefits for post-65 employees, according to the study.

In choosing not to offer LTD benefits, employers are following an established legal precedent in Manitoba that employers are not obligated to offer LTD benefits for employees age 65 or older, she said.

Meanwhile, employers were divided on whether to offer life insurance benefits. While 29% said they would offer the same life insurance benefits to employees after age 65, 31% said they would not extend life insurance benefits to post-65 workers and 22% said they would do so with restrictions, such as implementing a maximum benefit amount or a higher age cap.

"They generally won't go indefinitely because of the insurance risks and the cost of that benefit," Ms. Byron said.

Regarding pension plans, the impact of ending mandatory retirement will be relatively minor because legislation in Ontario already covers older workers, benefit consultants say. Under Ontario law, employees can continue membership in pension plans and accrue benefits past age 65 subject to service or contribution caps. "The more difficult questions will come on the nonpension benefits side," Ms. Morowicz said.

Pension experts, though, are waiting for regulators to publish their interpretation of the amended law with respect to minor issues, such as whether a plan sponsor can structure its pension plan to specify that an employee who starts working for a company at age 65 or older is not eligible for a pension.