Crafting The Right Benefits Package

Welcome to Risky Business Commercial Insurance with Butler Buyers. This is business commentator Paul Martin sitting in the studio and joining me today is Ryan Warner and he is a benefits specialist and works very closely with the gang at Butler Buyers. And benefits really are a big part of the commercial insurance decision making process for business owners and those who are professional managers or executives charged with trying to run a business. And we talk a lot about it Ryan, first of all, welcome to the program. Again, you’ve been here a few times with us. But we tend to talk more, I guess, in terms of commercial insurance, top of mind stuff comes as things like ensuring your buildings, that kind of stuff. But clearly the benefits side, it’s a big part of what a company does when it’s buying insurance. And you guys I’m thinking are getting to be actually probably more and more attention is given to this because the demands being placed on companies and as they craft a benefits plan for their employees is probably getting more and more complex. Is that a fair comment?

Absolutely. That’s exactly what we’re telling everyone too, that this is no longer just the cost of doing business. It’s something that requires regular attention and a lot of upkeep to keep on top of the complexities.

And it’s not just one size fits all.

Absolutely not. Every-

It would’ve been that way though, 10, 20, 30 years ago. Right? I mean that…

That’s right.

A lot of people grew up on the notion that it’s a plan and it covers your dental and your covers your drugs and that’s the end of it. That’s a long ways from that.

Yeah. Things have changed dramatically in the last 20 years. I mean the landscape and what employers used to do for their longstanding employees that had been with them forever, there was a very traditional standard structured to benefit plans which really isn’t the case anymore. I mean, things vary so much by industry, by size of group, by the multi-generational trends that are out there these days as well.

You just used the word multi-generational. I wanted to talk about that. This past year was the year that millennials became the largest cohort in the workforce. We’ve had the boomers who were the biggest, now two or three years… The leading edge is two or three years into what we would have traditionally considered retirement age. So ,that workforce demographic is changing. My guess is that’s changing the demands that are being put on the insurance programs too.

Yeah, honestly, it’s night and day. Things since the baby boomers, as they slowly kind of exit, you’ve got the Gen X looking at their demands at the back end of their careers. Millennials are looking for something completely different than what baby boomers and Gen X were traditionally looking for. And I don’t know if it’s formalized yet, but the next generation coming up the pipe I-Gen is looking something different all over again. So it’s really important that you start to wrap your head around and familiarize yourself with what each generation is looking to achieve so that you can appropriately attract and retain these folks.

So there’s another word again, retention of employees in a labor market. Saskatchewan’s labor market, I mean you probably would think it’s kind of soft. In fact, it’s the other way around. Employers have really been carrying their end of the bargain by creating jobs. And even though the economy is not what it was, say five years ago, it is still a workers’ market, if I can put it that way. So employers are having to compete for talent, particularly to hold onto to good talent that they’ve got. And you said these generations are looking for something different, so perhaps you can kind of just walk me through. So what is the difference between the demands that the boomers have and the millennials have? I mean why the big gap? What’s causing those differences in what they’re looking for?

I think naturally with age comes different needs in different stages in life. So certainly, the younger side of those generations that is coming into the workforce and taking over the majority, they tend to be looking for flexibility. They’re looking for the more capable benefits that will accommodate their needs that don’t necessarily tie to health. Things like health spending accounts that give the employee the flexibility to get their full expensive of glasses taken care of or prescription sunglasses or they want to go for more massage therapy because they’re not necessarily using as much on the medication side. So your younger demographics are looking for benefits that impact them today, not going to take care of them and their family necessarily, where your older generation is going to be far more considering things like medications, disability coverage, the more scary realities of benefits in those catastrophic type coverage has become far more important to those age groups. And then certainly on the retirement side, that’s a whole other animal altogether.

Yeah. I want to talk about the retirement side, the benefits and pension plans and RSPs and all of that and maybe we can just hold that for a minute. I am kind of curious about, one of the interesting anomalies that I see right now is we have this traditional mindset in a Western economies, North America and economies at least that 65 is a golden age. That’s a magical year, but life expectancy tables are changing and all of that and people aren’t retiring at 65 so necessarily anymore. It’s not the golden handshake kind of thing. How’s the benefits programs kept up to that? Or do they cut you off at 65 because that’s just traditionally the way we’ve been? And does that cause more grief for employers in crafting a plan?

Oh, that’s a great point. And the perspective out there is really the insurers aren’t pushing to drive change in the termination aids. Some benefits are going to terminate at age 65 regardless. I mean longterm disability as an example is one of them that the industry just hasn’t tweaked much. There’s very few options that go beyond 65. All of your other benefits, health, dental, a lot of those benefits are either extending now. In fact, I’ve seen the average termination age be like 80 or 85 for a lot of benefit plans. So to accommodate those that want to work a lot longer. There’s still other benefits that they reduce after 65, so there’s still something on the table. Life insurance as an example usually reduces by 50% at 65 so there’s benefits there, but again, it’s up to the business, the employer to look at their plan and make sure that those parameters are there to accommodate the aging folks. And ageism is a reality. So for those older folks out there, make sure you’re asking the question.

I’m just curious as to whether or not and this is from the perspective of the employer. Are they coming to you with sufficient frequency to ask the good questions to say, “let’s make sure our plan is current. It’s up to date. It’s got all the latest bells and whistles.” Are you experiencing that or is that just something once I’ve got it built, I kind of lock and forget as an employer?

As you can appreciate it, that this isn’t what they do every day. So, I can’t imagine too many employers are staying up late at night worrying about the termination age on their benefit policy. From our perspective we’re going to be very proactive about those things and we’re constantly reviewing client demographics to understand the shifts inside their plans so that we can educate and advise appropriately on what they need. But for those out there that maybe don’t have that proactive approach looking after them, it would be their responsibility to step up and ask the question.

Do you encourage… Sometimes we do things like we set a date on the calendar. New year’s day, for example, change all the batteries in your smoke detectors. Do you encourage employers to say once a year, every second year, just sit down with us and let us have a chance to sort of to tell you what the latest thinking is and to review your plan?

So from our perspective, we’re reviewing the plan quarterly, if not more often. So we’re constantly on top of it. We want to get in front of our clients at least twice a year. That’s not always talk about in length, the plan design specifically, but certainly at least once a year, we’re going to go through it to just educate on what the new trends are in the industry, where they might be able to tweak things or possibly just adjust based on what their claims experience looks like.

All right, well we’ve been talking a lot about sort of insurance side of benefits and we’ve got to take a little break here and when we come back I want to start talking about the retirement plans and RSPs, pensions, this kind of stuff, that sort of financial management piece of it if we could. So you’re listening to Risky Business, commercial insurance with Butler Buyers. We’ve got to take a short break. We’ll be back after this.

Welcome back to Risky Business commercial insurance with Butler Buyers. This is Paul Martin and joining me in the studio is Ryan Warner, the benefits specialist who works very closely with Butler Buyers and he sits in periodically to bring us up to date on some of the latest thinking and developments that are going on on the benefit side of commercial insurance. So we were talking about dental plans and these kinds of things before and now we’re going to start talking about retirement savings. And I guess this is where the demographics really come into play, isn’t it? I mean, you’ve got this workforce that is big bulge of boomers, big bulge of millennials, and kind of a you in between there a little bit of a valley. What are the challenges that the industry and employers are facing on this one? Because my guess is the needs are different.

Dramatically different. ]You’re older generations now that they’re approaching retirement are thinking very differently. They’re now realizing, hopefully we’ve put enough away and if we haven’t, how’s that going to look? What are the government benefits going to look like come retirement. So I would say your Gen X and your baby boomer crowd is really in need of education more than any things to feel comfortable with what those next couple steps look like versus the younger generation. I mean, the argument right now is just trying to get them to save at all. So that’s a challenge for employers. But I’m seeing a lot of activity in employers being creative in how they are trying to attract and again, retain the younger demographics and utilizing retirement savings in a different strategy. So it’s really interesting some of the nuances that are out there and really not a lot of change in what’s available, just how it’s being presented.

Well, in Saskatchewan, we’ve laboured under this thought that we have a saving culture. And there was a time when we did it, I think about 1983, 23 cents out of every dollar that an employee earned in this province went into savings. I mean, it’s a remarkable number. We are about two or 3% right now, which is actually a quite an improvement because we were negative two or three, just three or four years ago. So we don’t have a saving culture anymore. And as a consequence, we need to actually be cognizant of that. I think we need to think and talk about that because we’re likely seeing across the country the largest group of people who have no retirement savings heading into retirement.

Absolutely. It’s a huge challenge. I mean I can’t stress enough how important it is to save and yet the world we live in now has changed so much. The youth are coming out a school with greater depth than they ever did before. Purchasing homes is far more difficult now. I mean, the argument there is also they don’t have access to the same money going into school or because tuition is so much higher than not coming out of school with the same resources. Incomes really haven’t gone up that much either. So all of these factors combined together make it very difficult for the younger generation to start the saving process. And the older generation, that hasn’t put enough away, I mean that’s possibly a big factor as to why they’re working so much longer as well. Not just because they want to.

Or that they’re fit and they’re living longer, but they actually have a need. Well, you constantly see headlines, for example in the business media that more and more people are going into retirement carrying debt, which would have been unheard of not so long ago. And it really is kind of counterintuitive. You think when I retire, everything should be paid for and I’m just going to live off this reduced income stream that’s going to come from a pension retirement or a retirement pension plan. World’s kind of upside down on this. So you were talking about what caught my attention was your reference to student loans and student debt. That one is really complicated. And I suspect you probably see it regional too, where if you’re trying to buy a house in Toronto, it’s quite a bit different than trying to buy a house in Saskatchewan to start with. I mean, our prices are more reasonable. But what are you hearing about this kind of stuff? What are the young people saying to you and to those of you who form these kinds of benefits plans? What are they saying that they need or simply can’t cope with, can’t deal with?

Yeah. As these individuals are coming out of school, they’ve got their ticket, they’ve got their diploma, whatever they’ve gone for, and now they’re ready to get that first job. And these employers have these great programs available. So there’s some kind of a savings platform there hopefully geared towards retirement. But as a younger individual coming out of school with all this debt, it can be a challenge to try to do everything. Right? I mean, we’re trying to teach them that they can’t do everything and sometimes it’s more important what they’re doing on the weekend. But as far as the debt versus participating in the retirement plan goes, it can be really tough on that individual to decide. Right? So what most plans do is offer some kind of a match. So, 3% that the employee has to put in, the employer is going to match it, which sounds great.

But if the employee is struggling with debt to the point where maybe they have to make the decision, that can be a really challenging choice. So we’ve seen now a development in the industry where now there’s a provider out there that’s willing to set in place a program where the employer will still make the match to, say an RSP program, but the employee’s 3% would go towards their debt repayments. So it’s a method of attracting somebody to join you and helping them understand that not only is this a great place to work, but we’re going to help you pay down your student debt and you’re still going to benefit from the retirement plan. So if you have to make that choice, we’re not going to force it on you.

So the young person would basically just have to demonstrate, I am indeed retiring my student debt and if I can do that, then the employer side will still contribute to a retirement plan. So it’s half of what you would normally expect, but it’s something.

That’s right. I mean in the event that somebody had to make that decision and said, “I can’t participate in this plan,” now they’re losing the full six. So I think something is always better than nothing, regardless of age.

I guess if it’s a group RSP, you get that deduction. So you get that little bit of a boost at tax refund time. And there is a saying in the financial world, time is your friend. So the earlier you can make a contribution, even the small 3% one can have a big difference at the back end if you’ve got 40 years or 50 years to see that money grow.

If I showed you some of the charts we put in front of employees when we’re doing education, I mean it’s scary the difference it can make. So starting as young as possible is obviously ideal.

Well, interest rates have a big factor in all of this too. I mean, I noticed the other day the federal finance minister came out with their interim financial statement and Ottawa’s deficit went up $7 billion and they didn’t increase spending. So there’s lots of spending announcements, but the money hasn’t left, but it went up. And why it was unfunded pension liability. That $7 billion was pension that they owe to government employees that will have to be paid down the road. People don’t have any idea of how sensitive that marketplace is. So you’ve got the federal government going deeper and deeper in debt, standing still simply because interest rates are going down.

There are problems from top to bottom in this system and frankly it’s all just not saving enough or not putting enough away. So government, personal, regardless of where you sit, if you’re not putting something away, you’re in big trouble.

So it’s look after yourself in this one? What are employers or businesses, commercial operations with payrolls, employees opting for? Do you see more development of pension plans or is it more group RSPs or can you be that just straight forward in that description?

Well, I think there’s a lot of RSPs going on out there that is the easiest to implement. It’s simple from an administrative perspective, that’s the most common. Certainly in the small to mid size companies, pension plans get a little bit more complex so that can be challenging for the small to midsize business to to get involved with. I mean we haven’t seen defined benefit pension plans set up in years, so it’s just defined contribution pension plans, which frankly you can structure an RSP to operate and function kind of like a defined contribution pension plan, so mostly RSPs I would say.

Well Ryan as always, this time just seems to blast by. I don’t know. I think I’m managing our time very well and I know got 50 more questions to go and all of a sudden the clock says, “no, you’re done.” But thanks very much for joining us. It’s a really interesting topic that is subject to clearly in Saskatchewan we talk a lot about pensions these days. It’s a hot topic that gets a lot of headlines and so thanks for bringing us those insights into how some employers are dealing with it.

Well Ryan as always, this time just seems to blast by. I don’t know. I think I’m managing our time very well and I know got 50 more questions to go and all of a sudden the clock says, “no, you’re done.” But thanks very much for joining us. It’s a really interesting topic that is subject to clearly in Saskatchewan we talk a lot about pensions these days. It’s a hot topic that gets a lot of headlines and so thanks for bringing us those insights into how some employers are dealing with it.