GroupNews – December 2019
Eckler’s GroupNews monthly newsletter provides commentary on the issues affecting Canadian group benefit plans.
In this edition:
- Maximum Canada Pension Plan and Quebec Pension Plan contributions for 2020
- Quebec Drug Insurance Pooling Corporation releases pooling terms and conditions for 2020
- Quebec introduces bill offering greater flexibility for parental insurance benefits
- Ontario launches free routine dental care for low-income seniors
- British Columbia announces final bills for MSP premiums
- National Institute on Ageing: The Future Co$t of Long-Term Care in Canada
Benefit plan management
Maximum Canada Pension Plan and Quebec Pension Plan contributions for 2020
The Canada Pension Plan and Quebec Pension Plan contribution rates for 2020 were recently announced. Rates are shown below:
| CANADA PENSION PLAN | 2019 | 2020 |
| Basic exemption | 3,500 | 3,500 |
| Year’s maximum pensionable earnings | $57,400 | $58,700 |
| Employer contribution rate | 5.1% | 5.25% |
| • Maximum employer contribution | $2,748.90 | $2,898.00 |
| Employee contribution rate | 5.1% | 5.25% |
| • Maximum employee contribution | $2,748.90 | $2,898.00 |
| QUEBEC PENSION PLAN | 2019 | 2020 |
| Basic exemption | $3,500 | $3,500 |
| Year’s maximum pensionable earnings | $57,400 | $58,700 |
| Employer contribution rate | 5.55% | 5.7% |
| • Maximum employer contribution | $2,991.45 | $3,146.40 |
| Employee contribution rate | 5.55% | 5.7% |
| • Maximum employee contribution | $2,991.45 | $3,146.40 |
Impact: Employers will need to ensure their payroll and HR systems are updated to reflect the 2020 limits.
Benefit plan management
Quebec Drug Insurance Pooling Corporation releases pooling terms and conditions for 2020
Every year, group insurers in Quebec must contribute annually to a pooling plan that protects sponsors of private-sector benefit plans against the financial impact of large drug cost claims. Based on pooling results for previous years, the Quebec Drug Insurance Pooling Corporation that manages the contributions from private plans has set the pooling parameters for 2020.
The following table compares the 2019 and 2020 terms and conditions:
|
Size of the group |
Threshold per certificate | Annual factor 2019 | Annual factor 2020 | |||
| 2019 | 2020 | Without dependants | With dependants | Without dependants | With dependants | |
| Fewer than 25 | $8,000 | $8,000 | $192 | $529 | $211 | $581 |
| Between 25 and 49 |
$16,500 | $16,500 | $122 | $337 | $137 | $376 |
| Between 50 and 124 |
$32,500 | $32,500 | $64 | $177 | $74 | $205 |
| Between 125 and 249 |
$47,500 | $47,500 | $44 | $120 | $52 | $142 |
| Between 250 and 499 |
$72,000 | $72,000 | $28 | $77 | $34 | $94 |
| Between 500 and 999 |
$95,000 | $95,000 | $22 | $60 | $27 | $74 |
| Between 1,000 and 3,999 |
$120,000 | $120,000 | $18 | $50 | $23 | $62 |
| Between 4,000 and 5,999 |
Free market |
$300,000 | Free market |
Free market |
$11 | $31 |
|
6,000 and over |
Free market |
Free market |
Free market |
Free market |
Free market |
Free market |
Impact: Group benefit plans are expected to experience a considerable increase (anywhere from 10%–25%) in pooling premiums applicable to their Quebec members as group insurers include the required Corporation’s cost in group insurance premiums. These adjustments are typically reflected in the renewal negotiation following the new pooling rates publication. Additionally, while groups of 4,000 participants or more were previously excluded from this arrangement, in 2020 that exclusion will now only apply to groups of 6,000 or over. This means it will be mandatory for groups between 4,000 and 5,999 participants to enrol in the Corporation’s pooling system. As such, their pooling premium for Quebec members could experience a significant change based on their current insurer’s charge compared to that of the Corporation.
Legal and legislative news
Quebec introduces bill offering greater flexibility for parental insurance benefits
The Quebec government has introduced Bill 51, An Act mainly to improve the flexibility of the parental insurance plan in order to promote family-work balance (Bill 51).
Bill 51 proposes to amend the Act respecting parental insurance to offer greater flexibility to parents using parental insurance benefits. The bill extends the periods during which maternity, parental or adoption benefits may be paid and increases the work-income-related exemptions to which a recipient is entitled during a week of benefits. It also increases the number of weeks of benefits available for the birth or adoption of more than one child by up to five additional weeks.
Currently, adoptive parents in Quebec are entitled to 37 weeks of leave. Bill 51 increases the number of weeks to 42, and parents who adopt children from outside of Quebec will be entitled to an increase from 42 to 52 weeks.
Additionally, parents who share benefits may be entitled to an increase in parental or adoption benefits from the Conseil de gestion de l’assurance parentale.
In the event of a child’s death, parents are granted an additional period before benefits end.
Impact: The amendments will offer new parents additional time to care for their children but will require employers and plan administrators to review their current policies to ensure compliance. Shortly after Bill 51 was announced, the government faced criticism for not providing adoptive parents with the maximum leave of 55 weeks made available to biological parents. It remains to be seen whether the government will amend the legislation before it is passed in the Legislative Assembly.
Legal and legislative news
Ontario launches free routine dental care for low-income seniors
On November 20, 2019, the Ontario government announced the launch of the Ontario Seniors Dental Care Program (OSDCP). First proposed in the 2019 Ontario Budget, OSDCP provides free dental care for eligible low-income seniors.
Ontario residents aged 65 and older with an income of $19,300 or less, or couples with a combined annual income of $32,300 or less, who do not have dental benefits will be eligible to apply for the OSDCP. Applications may be made online or in-person at a local public health unit.
The government anticipates that 100,000 low-income seniors will benefit from the program annually. The new program will be available through public health units, specific mobile dental clinics, and participating Community Health Centres and Aboriginal Access Centres.
Impact: While the provision of dental services to low-income seniors is welcome, there is no anticipated impact to plan sponsors, since eligibility is contingent on not having dental benefits.
Legal and legislative news
British Columbia announces final bills for Medical Services Plan premiums
The British Columbia government has announced that residents will receive their final bill for the province’s Medical Services Plan (MSP) premiums in December 2019. On January 1, 2020, MSP premiums will be fully eliminated, as first discussed in the April edition of GroupNews.
When compared to the premiums prior to the 50% cut implemented at the start of 2018, the elimination of MSP premiums will save individuals up to $900 per year, and families will save up to $1,800 per year.
The MSP program will continue to provide eligible residents with provincially insured health care benefits. Residents will be required to continue to fulfil MSP obligations under the Medicare Protection Act and regulations, such as proof of identity, to complete enrolment in the MSP and to obtain their BC Services Card. Any MSP beneficiaries who have auto-payments through a financial institution should cancel the arrangement to ensure payments are stopped.
Impact: The elimination of MSP premiums is good news for plan sponsors that currently cover some or all of these premiums for their plan members. Without the change, they would have also been paying the Employer Health Tax introduced by the government in 2019 to make up for the resulting loss in MSP premium revenue. Additionally, employer MSP subsidies are a taxable benefit to employees and retirees. As such, with the elimination of the premium and corresponding employer subsidies, many plan members and pensioners will see an increase in their net take-home pay or pension.
Actuaries’ corner
National Institute on Ageing: The Future Co$t of Long-Term Care in Canada
Bonnie-Jeanne MacDonald, resident scholar at Eckler Ltd., and the director of financial security research at the National Institute on Ageing (NIA) at Ryerson University, recently released a paper on the NIA’s study of the future cost of long-term care in Canada (in collaboration with two co-authors). The purpose of the study was to gain insight on the challenges Canada will face over the next 30 years in managing the cost of long-term care to the government and private sector.
According to the NIA, long-term care includes a range of preventive and responsive care and supports, primarily for older adults, that are provided through nursing homes, in-home or community-based settings. The services are delivered through publicly funded programs and supplemented with privately paid services and unpaid caregivers (e.g., close relatives and friends).
Over the next 30 years, the number of Canadians over age 85 is expected to triple. Coupled with lower fertility rates and the significant corresponding reduction in the pool of unpaid caregivers, the study shows that in 30 years:
- Long-term care costs are expected to grow from $22 billion to $71 billion;
- The number of older adults that will need home care support will increase by more than 120%; and
- The number of close family members available to provide care will reduce by 30%.
Impact: The rising future cost of long-term care in Canada is just one contributing factor to the problem. Faced with an ageing population, longer life expectancy and escalating health care costs, governments will likely look to continue to shift more health care costs to the private sector. As such, group plan sponsors and individuals could be faced with a heavy financial burden. As costs and accounting liabilities increase, the number of group plan sponsors seeking to reduce or eliminate coverage for retirees has continued to grow year after year. Governments, plan sponsors and individuals will have to act now and work together to develop sustainable solutions to counter the impacts of ageing. The solution may not be the same for everyone. However, reviewing group plan designs and providing appropriate employee education on the problem, and their role in the solution, is an important first step.
This publication has been prepared by the GroupNews editorial board for general information and does not constitute professional advice. The information contained herein is based on currently available sources and analysis. The data used may be from third-party sources which Eckler has not independently verified, validated, or audited. They make no representations or warranties with respect to the accuracy of the information, nor whether it is suitable for the purposes to which it is put by users. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Current editorial board members are: Andrew Tsoi-A-Sue, Ellen Whelan, Charlene Milton,
Alyssa Hodder, Philippe Laplante, and Nick Gubbay.