The Leslie Group Ltd. - News

Managing Group Insurance Plan Costs

2011-04-02T11:53:21-04:00

The management of group insurance plan costs even in positive economic times is never easy, however with the current economic downturn, reduced group insurance carrier options and increased claims utilization trends the challenge has been significantly increased. These factors combined with limited buying power for small businesses of less than 25 employees and even up to 100 employees has resulted in many clients seeing double digit increases with the only viable solution available is to reduce the coverage provided to their employees and or increase the employee share of the plans costs (see attached edited Benefits Canada article “Employee Benefits: Between A Rock And A Hard Place”: March 2009)

The Leslie Group who manage over 75 million in group insurance premiums has been successful in limiting overall plan increases in 2010 to an average of low single digits. This is due to a creative approach to plan design and utilizing our leverage in renewal negotiations. While these solutions have and continue to bring excellent value to our current and new clients we felt that we could further enhance the value we offer to our clients. The number 1 employee benefit issue to small business is no buying power. A number of our competitors have chosen to recommend moving to Administrative Services Only (ASO/self insurance) for their small business clients to reduce expenses and costs; however in our opinion the increased risk by moving to ASO to the employer in the majority of circumstances outweighs the potential reward in the long term for small employers.
Our experience tells us that small businesses want value, competitive benefits, with no increase in risk. The Leslie Group solution is a multi-employer “advantage plan” that offers significant savings to our clients without an increase in risk. The key advantage with the multi-employer plan is significantly increased buying power which reduces the plan expenses charged by the group insurance providers by as much as 35% with no increase in liability as the plan continues to be 100% insured and all clients receive a standalone contract. These savings are sustainable over the long term and not a short term fix. When these are combined with our leverage in negotiating renewals, a creative approach to plan design to contain costs while providing competitive coverage, and our preferred pharmacy network of over 500 pharmacies across Canada that provide a preferred (reduced) dispensing fee, this mutli-employer arrangement allows our clients to be able to effectively manage their benefits costs.

Should you wish to explore the advantage of our multi-employer program please contact The Leslie Group at (416) 510-8966.

Retirement Annuities provide guaranteed retirement income at a price

2011-04-02T11:52:49-04:00

The life annuity is a retirement investing product with to-die-for optics.

Life annuities pay a regular, guaranteed amount of money every month for as long as you live, which addresses two big retirement risks. One, that the stock market will crash just as you're about to start drawing down on your retirement savings and, two, that you'll outlive your savings.

Worry-free income for people who don't have company pension plans - that's the idealized view of life annuities. But for reasons that relate both to current financial market conditions and the way in which life annuities are constructed, their real-world appeal is limited.

The term annuity is a broad one that encompasses segregated funds, a type of mutual fund with insurance guarantees, as well as the guaranteed minimum withdrawal benefit (GMWB), which is a retirement income product that protects you from losses in the markets while offering the possibility of investment gains.

Life annuities come with a few different variations, but the basic concept is that you turn over a lump sum to an insurance company that commits to paying you a fixed amount for the rest of your life.

Long-term interest rates have a big impact on the amount of your monthly payments, but there's another factor as well, called mortality credits. Think of mortality credits as premiums paid by annuity holders who died sooner than expected. These premiums help increase the amount of the monthly payments you'll get when you buy an annuity.

Lowell Aronoff, an annuity expert and chief executive officer of Cannex Financial Exchanges, says life annuities are an answer for people who are worried about how they will cover the basic costs of living in retirement.

"You need to lock in a certain amount of assets to cover these costs for the rest of your life, and annuities do that more efficiently than anything else," Mr. Aronoff said.

Life annuity sales have risen in recent years, but not as much as you might expect, given the level of financial market uncertainty we've seen. The Canadian Life and Health Insurance Association reports that assets in life annuities totalled $25.9-billion as of last Sept. 30, up almost 6 per cent from the end of 2009 (that's premiums paid plus investment gains on that money, minus money paid out to annuitants).

Asher Tward, vice-president of estate planning at Tri-Delta Financial, has a theory that life annuities aren't more popular because the rules are so rigid. Once you buy an annuity, you can't cash it in or get your money back.

"People want to do the conservative thing, but they don't want to lock in," Mr. Tward said. "People hating locking themselves into something for a long time."

The locked-in aspect is a particular worry now, with concern about inflation mounting. A life annuity cannot protect you against higher living costs unless you pay extra for one that offers inflation-indexed payments.

There are also a couple of structural reasons that make life annuities unattractive, one of them being the fact that they're a strikingly bad value if you buy one and die soon after. If you don't ante up the extra money for an annuity that keeps money flowing to a spouse or your estate upon your death, your annuity investment passes to other investors through those mortality credits.

Another negative is that annuities can seem opaque when you try to compare them with other investing options. The mix of factors insurers consider in determining annuity payouts include the amount of money you contribute, your age, long-term government bond rates, mortality credits and fees to pay advisers who sell annuities. It's very difficult to compute the monthly payments of an annuity into an annualized rate of return based on a scenario where you, say, buy at 65 and live to 85 or 90.

Today's very low interest rates add to the uncertainty about the long-term attractiveness of an investment in an annuity. "If we were in a high-rate environment, it would be a fairly easy decision to buy one," Mr. Tward said.

Annuity payments vary from company to company, so shopping around is mandatory. A survey on Cannex's database this week found that a 65-year-old male buying a plain $100,000 life annuity this week for a registered retirement savings plan would be able to generate monthly income ranging from $579 to $652, while a female of the same age would have had a range of $556 to $579.

Consider not just the amount of a life annuity payout, but also the insurer's financial stability rating from a company such as A.M. Best (ambest.com). Note that the life insurance industry's consumer protection plan, Assuris, covers the higher of $2,000 per month or 85 per cent of your monthly payment if your insurer becomes insolvent.

When considering an annuity, remember that the Canada Pension Plan and Old Age Security provide income for life, as does a company pension.

Life Annuities: The ABCs

The concept

Where to buy them

Where to put them

When to buy one

The add-ons

Fees

Tax issues

How to use them

Shop around

Type of annuity	What it's designed to do	Hypothetical monthly annuity income
Straight life	Provide you with income for life.	$650
Life plus five-year guarantee	Provide you with income for life. Guarantees 60 payments to your estate in case you die within the first five years of your contract.	$640
Life plus 10-year guarantee	Provide you with income for life. Guarantees 120 payments to your estate in case you die within the first 10 years of your contract.	$620
Life plus joint-and-last-survivor	Provide income for life for you and your spouse. Payments stop when both of you have died.	$500
Indexed life annuity	Provide income for life. Payments increase with inflation to maintain your buying power.	$400 to start (goes up when prices rise)

To learn more about Life Annuities or your options at Retirement, please contact The Leslie Group Limited at (416)510-8966. The Leslie Group is a full service employee benefits consulting firm that is committed to providing you with the best advice needed to manage your group retirement plan.

This article was taken and edited for content from the February 26^th, 2011 Globe & Mail.

Benefit Continuation for Disabled Employees

2010-10-21T13:12:23-04:00

Disabled employees can represent a significant continuing liability under group insurance plans.

Employers are often under pressure to discontinue benefits, but find it difficult to deal with the specific circumstances involved in each case. There is a lack of formally defined regulations for the continuation of benefits for employees absent from work due to illness or injury. This makes it extremely difficult to establish one set of guidelines for all employers.

We recommend that a formal policy be established with respect to the continuation of benefits for disabled employees. The following are some guidelines for your consideration:

• It is important that sick pay or disability benefits are continued and the employee's eligibility for long-term disability (LTD) benefits is not impaired.

• The Workers’ Safety Insurance Board (WSIB) states that an employer must continue payment of
benefits for one year for employees receiving payment from WSIB.

• Human Rights does not specify the period for which benefits must be continued. However, they may consider it discriminatory if benefits were continued for employees receiving benefits from WSIB but not continued for employees receiving LTD.

• Human Rights does not permit discrimination between an active employee and a disabled employee. Any benefit available to an employee prior to disability must be continued in the event of a legitimate disability.

• Insurance policies do not typically state any position with respect to the continuation of benefits for employees on long-term disability.

• If an employee is disabled and receiving WSIB benefits, an application for LTD should also be submitted to the group insurance carrier in order to establish eligibility for the LTD benefit. This is important in the event that WSIB benefits terminate in the future.

• Many life and accident insurance policies contain a provision for waiver of premium due to disability.This provides for continuation of life insurance coverage without premium payment until the earliest of recovery, death or the employee reaching age 65. Under a group insurance policy, LTD premiums are waived upon the commencement of benefits.

These guidelines ensure that all employees insured under the group benefit program have equal access to continued life insurance and long-term disability coverage in the event of disability.

The difficulty for employers lies in determining when, and if, health and dental benefits for a disabled employee can be terminated. The decision to discontinue a disabled employee's health and dental benefits is dependent on when the employee/employer relationship can be terminated. If the individual's status as an employee is terminated, the individual is no longer eligible for health and dental coverage under the terms of the group insurance contract.

An employer may terminate an employee whose contract of employment has become impossible to perform or been "frustrated" because of illness or injury; for just cause; or after giving reasonable notice of termination based on the Employment Standards legislation in the applicable province. Benefits must be continued during the statutory notice period in all provinces.

Prior to termination of a disabled employee, legal counsel should be obtained. Employers may be vulnerable to court action unless undue hardship can be proven (particularly for employers with more than 20 employees) or the employer has made every effort to accommodate the return of the disabled employee to the workforce. This decision is dependent upon the nature and expected duration of disability, the length of service of the individual employee and type of occupation, size of the company and duty to accommodate employment requirements and limitations of the disabled employee.

Benefits should be continued for a minimum of one year from the date of disability. It is however, typical for employers to pay benefits for a period of two years. The main reason for this two-year extension is that it coincides with the two-year own occupation definition in the most LTD contracts. Employees who qualify for continued LTD after the first two years of disability usually have a chronic condition and will not return to work. It is generally considered that two years of disability is sufficient time for employers to terminate the contract of employment on the basis that it is “frustrated”. Once employment is terminated, benefits can no longer be provided through the benefit plan.

We recommend that you insert a page into your Company Policy that states, "Our Company will continue health and dental benefits for our employees receiving disability benefits, for a period of x years. The employee will continue to be responsible for their portion of the premium. In the event that the employee does not pay their portion their coverage will be lapsed by the insurance company for non-payment of premium".

Province	Worker's Safety Insurance Board	Labour Standards	Human Rights (Provincial)
Ontario	Employer must continue payment of benefits for 1 year while employee is receiving WSIB benefits or participating in an approvedrehabilitation program. Employee is responsible to continue paying his/her portion of the cost	Employer may terminate a disabled employee if the contract of employment has been frustrated	It would be considered discriminatory if benefits are continued for employees receivingWSIB benefits but not continued for employee receiving long-term disability benefits.

The Leslie Group is a full service benefits consultingfirm that is, in keeping with market conditions and legislative changes, committed to providing you with the best advice needed to manage your group benefits program. We would be pleased to address any questions and can be reached at (416) 510-8966.

Executive Medicals: An Incredible Body of Work

2010-10-14T17:06:33-04:00

It's 7:45 a.m., and several executives are gathered on the 15th floor of a downtown office building. The clinic is busier than ever these days. That's a reflection of the overall increase in the number of executives whose health care is being looked after by their employers. 59.1% of CEOs and 55.5% of senior executives were offered an annual medical exam as part of their compensation package last year -- up from 43.6% and 42.2%, respectively, in the year 2000.

Medcan alone has grown 50% in each of the past two years, and now handles 50 to 60 appointments a day. Considered Canada's largest executive health care provider, Medcan has a client roster of 27,000, which includes managers from every major bank, law office and consulting firm in Toronto. Its main competitors, MDS Executive Health Services and Montreal-based Medisys, are also doing brisk business. All three organizations have affiliate clinics in major Canadian cities, allowing them to co-ordinate the health care of national companies.

The men and women assembled in Medcan's waiting room on this morning will spend about four hours at the clinic, as they undergo a full-throttle executive physical that makes the annual work-up provided by most family physicians seem perfunctory, indeed. The day begins in a locker room that's a smaller version of what you'd find in a posh health club. After changing into your gym clothes, you leave a vial containing a sample of your urine on the back of the toilet, which spares you the embarrassment of handing it to a nurse. Then you're escorted through a series of tests
that would take months to arrange individually, including an abdominal ultrasound, chest X-ray, blood work, a treadmill stress test, vision and hearing tests, a half-hour interview with the doctor and even a brief massage. Men and women also get gender-specific tests using sophisticated scanning technology that family doctors can only dream of.

A medical exam that last four hours? Are you joking? Actually, no. Medcan's president, John Mozas, points out that two-thirds of the men and women who come to the clinic for a comprehensive health assessment do so on their employer's dime, and many big businesses make the annual examination mandatory.

"If you head up retail banking, for example, the company wants to make sure you're healthy, because indirectly you've got thousands of people reporting to you. It's important not only for your health, but the health of the organization," he says.

That's why so many corporations don't flinch at the $2,695.00-a-person price tag for Medcan's services. Firms invest a lot of money in their top-tier managers and they suffer big losses in productivity if serious illness, or even premature death, takes them out of the boardroom.

It's very costly to replace senior executives, so this is a kind of risk-management approach to helping executives continue service to a company for a longer period of time.

In the past, many large firms gave this responsibility to a medical director -- a physician the company kept on the payroll. But while an appointment with the medical director may have felt like an onerous duty thrust upon employees by a paternalistic corporation, a visit to an executive health clinic is increasingly seen as something of a perk, almost a status symbol.

Fred Jaques, president of Dare Foods in Kitchener, Ont., is one of nine executives at the company -- all men aged 40 to 63 -- who make an annual trip to Medcan. Dare has offered the benefit to its top brass for four years, and it's something Mr. Jaques says fits with the culture of the family-owned company.

"It's about contributing to the wellness of our executive team, and it's been very important. This past year a couple of our members have had major issues uncovered that they weren't aware of, so there's been a lot of, "Thanks, this has really helped."

Staff or Contractor – Where the Line Is Drawn

2010-10-14T17:06:28-04:00

The line that distinguishes an employee from an independent contractor isn’t always clear. But blurring it can result in serious implications for both the worker and the employer.

With as many as one in four individuals in the workforce either on temporary contracts or working for themselves — according to Statistics Canada, 15 per cent of Canadians worked in temporary jobs and nine per cent considered themselves single-person businesses in 2001 — it’s increasingly common for payroll practitioners to handle pay for workers who aren’t employees of the organization.

Earlier this year the Federal Court of Appeal explored the various means by which the law distinguishes between an independent contractor and an employee in Royal Winnipeg Ballet v. Minister of National Revenue.

The Royal Winnipeg Ballet was appealing an earlier decision of the Tax Courts, which determined that dancers engaged by the ballet company were in fact employees.

The determination was significant in that it would require the ballet company to pay Canada Pension Plan contributions and employment insurance premiums on the dancers’ behalf.

From the dancers’ perspective, the determination meant that statutory deductions would be made at source and, ultimately, they would not enjoy the benefit of writing off business expenses reasonably incurred to earn income from self-employment.

The appeal court carefully reviewed the various tests that have been developed over time to differentiate between employees and independent contractors, beginning with the integration test. This test, first articulated by the English courts in the early 1950s, examines the relationship between an individual’s work and the business that engaged them. If the individual was employed as “part of the business” and their work was integral to the business, they would be considered an employee. On the other hand, if the individual provided services from outside and the services were accessory to the main operation of the business, they were regarded as an independent contractor.

This test has subsequently been discounted, as parties that have developed a “relationship of mutual dependence” are necessarily deemed to have an employment relationship. To replace it, certain courts began applying an “analytical framework” by posing the following question: “Is the person who has engaged her to perform the services performing them as a person in business on her own account?”

If the answer is yes, then the person is an independent contractor. If the answer is no, she is an employee. In order to answer the question, one must ask who exercises “control” in the relationship. For example, does the individual set her own hours, is she free to accept or refuse work, is she subject to company policy and discipline and is she free to hire others? In this regard, the question to ask is whether the so-called employer has the right to exercise control, not
necessarily whether they actually do.

Reference was also made in the case to the historical “four-fold test.” Under this analysis, the following are indicators of an independent contractor relationship:

• control;

• ownership of tools;

• chance of profit; and

• risk of loss.

Chance of profit and risk of loss focuses on whether the individual is simply paid a salary or whether she actually stands to gain or lose depending upon how her services are provided.

Managing Disabled Employees

2010-10-14T17:06:04-04:00

When an employee becomes disabled due to illness or injury, they are eligible to apply for long term disability benefits, which if approved, will continue to age 65, so long as the employee continues to satisfy the definition of disability in the contract. Your disabled employee may also be eligible to apply for waiver of life premium and waiver of accidental death & dismemberment premium. If these provisions are contained in your contract, and the claims approved, the life and accidental death & dismemberment coverage will remain in force, without premium payment, to age 65, again so long as the employee continues to satisfy the definition of disability in the contract.

This leaves the matter of how to manage your disabled employee’s employment position and the balance of benefits, mainly health and dental benefits. Without a formal policy in place outlining to your employees exactly what will occur in the event of a disability, employees could assume that employment and benefits will be provided to age 65, when the disability and waiver claims will terminate.

The Leslie Group strongly recommends publishing a formal policy and applying it consistently in all situations of disability. An employer has a duty to accommodate a disabled employee. As a result, we suggest that you maintain employment, and therefore the health and dental benefits, for a period of 24 months from the date of disability or the last day actively at work. Conversely you may wish to implement a tiered policy where the employment and benefits are maintained depending on years of service. It is also important to communicate the termination of
employment and benefits with the utmost care and consideration for your disabled employee. The termination should be communicated, in writing, well in advance, and should include information, and any necessary forms, regarding the disabled employee’s eligibility to convert terminating benefits to individual products. You should also include contact information for your company and the insurance company should the employee have any questions about what will transpire.

It’s important to remember and reassure your disabled employee that the termination of their employment, will not affect the status of their long term disability, life and/or ad&d waiver of premium claims. These benefits will remain in force so long as the employee continues to satisfy the definition of disability in the contract, regardless of the status of employment.

The Leslie Group would be pleased to assist you in drafting a formal policy, however, our recommendations are reflective of our experience with these situations and do not constitute a legal opinion. We strongly recommend that an employment lawyer review the policy we help you draft before publishing it to your employees.

In addition, we also suggest that you review the specifics of any given situation with an employmenlawyer before you terminate the employment, and therefore the benefits, of a disabled employee. In certain situations, there may be extenuating circumstances that a lawyer can help you address.

Publishing a formal policy governing disability, and applying it consistently, will not necessarily protect you from a lawsuit. But, it will lessen the probability of one, as all of the players knew what was going to happen from the beginning. In the event that you do find yourself faced with a lawsuit from a terminated, disabled employee, having a formal policy in place will certainly help prove to a judge or mediator that you genuinely tried to accommodate your disabled employee, which will help to mitigate any damages that may be awarded.

Please contact your Leslie Group consultant or service representative at (416) 510-8966 should you wish to discuss this issue further or develop a formal policy.

The Changing Retirement Age in Canada

2011-04-04T10:55:38-04:00

The age at which Canadians expect to retire is increasing, more out of need than desire. But there’s one thing group retirement plan members think can help – and that’s getting a little advice along the way.

If you thought that attitudes about something as far away as retirement wouldn’t change in a few short years, the results of a recent survey may surprise you.

The 2010 Sun Life Canadian Unretirement^TM Index – an annual survey that tracks workers’ attitudes and expectations about retirement – reveals some surprising trends about Canadians’ thoughts about retirement.

The annual Unretirement Index survey is one of the key ways that Sun Life Financial – and our plan sponsor clients – are able to determine member needs in order to help them achieve lifetime financial security.

This year’s survey was conducted online between November 24th and December 7th, 2010. A total of 3,422 Canadians aged 30 to 65 participated from the Ipsos Reid Consumer Panel of Canada, which consists of more than 40,000 pre-recruited Canadian households (close to 100,000 individual).

Of survey participants, just over half (53%) were members of group plans or had a spouse who was a member of a group plan. Here’s a look at some of the key findings of the survey – as well as some specific insights as they relate to group retirement plan members.

Overall – Canadians not as confident about retirement

The overall Sun Life Canadian Unretirement Index score – measuring the confidents of working Canadians – is down significantly from prior years, to 39 in 2010, from 50 in 2008 and 51 in 2009.

The index runs on a scale of zero to 100 where 100 represents extreme optimism and the expectation of a perfect retirement at the perfect time. The lower the index number, the more negative or pessimistic the outlook is on issues that influence retirement.

And the pessimism has increased. Canadians believe they’ll work much longer than the traditional retirement age of 65, are less confident about their retirement-readiness and outlook, and are increasingly more concerned about their financial well being.

One possible reason for the drop in overall confidence is that at the end of 2009, many Canadians were hopeful the recession was over in this country – and that recovery would be swift. While the recession did end, Canada did not witness the extensive economic rebound it had hoped for, with unemployment still high, GDP increasing at low levels, and continued worries about the health of other countries that could impact our economy.

Meet the new Canadian retirement age

The most significant shift in the thinking of Canadians about retirement over the past year is the change in their expected retirement date. For all working Canadians, the average age they expect to retire has moved up three and a half years, to almost 68. Last year, that figure was just above age 64.

In fact, only 28% of working Canadians between 30 and 65 in the survey thought they would be fully retired to age 66 years.

The retirement age gap is even more pronounced when broken down by two other factors: income and age. Canadians who earn over $100,000 expect, on average, to retire at the traditional age of 65, while Canadians who earn less than $50,000 expect to wait until age 70 to retire.

In terms of age, as people approach retirement age their expectation of when they will retire increases from 67 years to those under 50, to 71.5 years for those in their early 60s.

In terms of regional differences, the expected retirement age generally increases as you move from east to west across the country.

•   In the east, Quebecers and Maritimers expect to retire earlier than other Canadians – age 65.5 and 66.4 respectively.
•   In Central and Western Canada, the expected retirement age is 68.6 in Ontario, 66.8 in Manitoba and Saskatchewan, and 68.7 in Alberta.
•   In B.C., the expected retirement age is the highest in Canada, at age 69.2.

Marital status also has an impact on an individual’s expected retirement date. The economic toll of martial separation is apparent, as individuals who are divorced expect to work until age 70, while those in marriage or partnership expect to retire at age 67.

Working past age 65 – more need, less desire

While age 68 is the “new” 65 in terms of the expected retirement age in Canada, fewer Canadians say they would continue working because they enjoy it – and more expect to work because they must. Last year, when individuals were asked why they would be working at age 66, more than half (54%) said it is because they want to. In 2010, that number declined to 39%.

Conversely, 62% of respondents say they will be working at age 66 because they have to, versus just 46% in 2009. Clearly, the outlook for the future has grown a little cloudier for many Canadians.

That sentiment is confirmed as the survey digs deeper into the primary reasons that Canadians plan to work past the traditional retirement age. In 2008, the most popular reason to work past age 65 was because respondents enjoyed their job or career. In 2010, the number one reason to work past age 65 is to earn enough money to pay basic living expenses.

Not surprising, those with higher incomes are inclined to cite personal fulfillment for continuing to work. 71% say they’ll work past age 65 to stay mentally active, and 60% say they’ll keep working because they enjoy their job or career.

That’s in stark contrast to those making less than $50,000 per year, as 68% say that economic necessity is the reason for working past age 65.

Age also plays a significant factor in the “need to” / “have to” divide. The worry about having to work after age 65 is highest at younger ages. But as people get older, many realize that they have enough money – and the need to work declines while the desire to work increases as the unknown frontier of retirement looms.

What group plan members say about retirement

While Canadians are in general more pessimistic about retirement – and planning to work longer because they need to cover expenses – there are a couple of clear areas where group retirement plan members have a decidedly different attitude.

The first is concerning their expected retirement age. While only 28% of survey participants expect to be retired by age 66, 40% of those with a group retirement plan (either their own or a spouse’s) expect to be fully retired at age 66.

In addition, only 45% of group plan members say that they now expect to work longer than they originally anticipated, versus 58% for those without a GRS plan. And almost two-thirds (64%) of group retirement plan members say their retirement will be as nice as they hoped, versus just 50% for those without a GRS plan.

In terms of the needs of group retirement plan members, there were two in particular that stood out:

•   Advice: 86% of those with group retirement plans would like some advice to help them make good decisions about their plan.
•   Guaranteed income: 68% of survey participants with a group retirement plan say that they want some income guaranteed – and that they are more worried about the risk of losing money in their investments.

In terms of guaranteed income, group retirement plan members have seen the impact of the 2008 market crash on their savings and can more readily appreciate the value of a guaranteed source of retirement income.

The value of advice is also appreciated by a large majority of group retirement plan members – and this value is reflected in the broader survey as well. The survey results clearly show that Canadians who have an advisor are more confident about retirement than those who don’t (a score of 44 with, versus 36 without).

And if we take financial planning a step further – to the written financial plan stage, the survey results also show that Canadians with a financial plan are more:

•   Confident about being able to take care of basic living expenses in retirement (84% with a plan versus 48% without a plan).
•   Confident about being able to take care of medical expenses (66% with a plan versus 38% without a plan).
•   Confident about having enough money to pursue their hobbies and interests in retirement (73% with a plan versus 32% without a plan).
•   Confident about having enough money to enjoy their lifestyle they want in retirement (71% with versus 40% without a plan).
•   Satisfied with what they’re saving for retirement (67% with versus 25% without a plan).

More Support = greater confidence

Based on the survey results, it’s clear that all Canadians – including group retirement plan members – can benefit from the greater support that comes from professional advice and the discipline of a written financial plan.

By developing some planning steps around items such as personal and workplace savings, pensions, portfolio diversification, asset protection, and income guarantees, individuals can develop much greater confidence – and peace of mind – in relation to their future.

For more information

For more information on the Sun Life Canadian Unretirement Index, or any of the information presented in this paper, please visit: www.sunlife.ca/unretirementindex

To learn more about group retirement programs and the value they can offer to your employees, please contact The Leslie Group Limited at (416) 510-8966. The Leslie Group is a full service employee benefits consulting firm that is committed to providing you with the best advice required to manage your group retirement plan and meet the capital accumulation plan guidelines.

This article was taken and edited for content from the March 2011 Sun Life InSight Newsletter

The Small Business Group Insurance Challenge

2010-10-21T13:12:53-04:00

With an increasingly restless and stressed-out work force facing erosion of medicare benefits and ever-spiralling prescription drug costs, employers are under more pressure than ever to provide comprehensive private group benefits packages for their staff.

But for small businesses, the expense can be a huge challenge and for many, it seems impossible.

When they do manage to put together a modest package to stem the flow of employees to larger firms with better compensation and opportunities, they face a Catch-22 trap: The higher their staff turnover, the more expensive it is for them to buy insurance; the poorer the insurance package, the higher the turnover.

A recent survey reported that 46 per cent of Canadian workers would consider quitting their job if a comparable one became available. And small companies are the least able to afford to lose employees.

"Employee health benefits are essential not only for peace of mind and attracting and retaining good employees, but [they] are also one of the best tax breaks small businesses can find."

Yet recent data from the Canadian Federation of Independent Business shows it's just not happening in a huge swath of the small business world.

When the CFIB surveyed its members in 2002, it found that 46 per cent were offering no employee benefits at all, and a further 13 per cent were offering them only to the owners' family members.

The chief reason given was the prohibitive cost -- 84 per cent said the premiums were too high. As well, 25 per cent said that there were no suitable plans.

Of those who did provide some kind of benefits package, 78 per cent reported their premiums had gone up in the past year.

The CFIB's own basic employee benefits package (which costs about $2,000 a year per employee) has been rising in cost by 15 per cent a year, "and that can't be maintained forever," says president Catherine Swift.

She says her organization has been nagging insurance companies for years to provide more options for small business, with limited success. "The trouble is, a whole lot of little wee guys are harder to service than a large corporation. . . . And the economies of scale stink."

The cost for a package of life, disability, extended health and dental coverage has a vast range -- from $1,500 to over $3,000 per employee per year plus applicable sales taxes for a core package of benefits.

"The bigger the group of employees to be insured, the lower the cost per capita." Premiums are set using a formula of past claims plus expenses plus reserves in the group insurance plan. "Big companies have the advantages of more predictability on average, a spreading of risk, and economies of scale."

Most reputable insurers offer small-business benefit packages, but many are not prepared to be as flexible as they are with larger companies.

"What high turnover means to the insurer is that people come in, become eligible, pay premiums for a couple of months, then have several hundred dollars worth of dental work and leave without making further premium payments. . . . That's a big problem for an insurance company."

Sergio Sgaramella, publisher of the successful Canadian design magazine Azure, says he struggled with employee churn for a long period of the firm's 20-year history.

He couldn't afford to provide benefits at first. And without a lot of opportunities for advancement in the 12-employee operation, staff would frequently bail out to go to bigger publications.

But the magazine took off in the late 1990s, when it expanded its circulation base and became more international in scope, and employees now enjoy a modest package of health benefits and life insurance.

You can obtain an affordable group plan and contain rising costs

It isn't easy, but small business can provide excellent benefits with flexibility to employees. Here are some tips from The Leslie Group Limited:

We can help you obtain proposals from the group insurance industry to ensure you receive the best value for your benefit dollars. We will also continue to represent you in negotiating claims disputes and at renewal times to ensure your renewal costs are fair and competitive and ensuring that your plan continues to meet your current and future requirements.

We will review the plan design on a regular basis such as an example to review eliminating or limiting the prescription drug dispensing fees charged for prescription drugs. Pharmacies in Ontario charge between $9.99 to $12.99 per prescription. By introducing a limit of $8.00 per prescription overall drug plan costs will reduce by
almost 10%, while providing employees with a choice of pharmacies that offer low dispensing fees (i.e. Loblaws, Zehrs).

Figure out what you want spend and structure an attractive plan within your budget. The cost will, in most cases, rise every year, as the cost of prescriptions and dental services continue to increase so don't offer benefits that you will have to take away later. By designing your plan correctly with appropriate cost containment features, your annual cost increases will be significantly reduced from the average in the marketplace.

A core basic life insurance and long term disability coverage are the most important items to include, followed by a prescription drug plan and dental coverage.

Review offering a Health Care Spending Accounts to offer increased plan flexibility and tax effectiveness. A Health Care Spending Account top ups when the core group insurance plan reimbursements fall short and provides your employees with expanded coverage typically only available to larger employers.

This article was taken and edited for content from the March 17, 2005 edition of the Globe and Mail Creative and flexibility in your plan design maximizes plan satisfaction by employees. The Leslie Group Limited can assist your firm in establishing a new program or reviewing an existing program to meet your short term or long
term requirements.

The Leslie Group is a full service benefits consulting firm that is, in keeping with market conditions and legislative changes, committed to providing you with the best advice needed to manage your group benefits program. We would be pleased to address any questions and can be reached at (416) 510-8966.

More changes to Ontario's drug system

2010-10-21T13:12:48-04:00

Background

There has been significant media attention surrounding the provincial governments proposed changes to the drug system. The following is designed to provide you with some unbiased information on the impact of these changes.

The Transparent Drug System For Patients Act, 2006, more commonly known as Bill 102, provided significant cost savings to the Ontario government on the publicly funded Ontario Drug Benefit (ODB) drug program for residents over age 65. It also created a two tier pricing system between public and private drug plans and resulted in substantial increases to dispensing fees for private payers and impacted all benefit programs.

In July 2009, the Ontario government announced its’ intention to further regulate the prescription drug market in a manner that could have both a positive and a negative effect on plan sponsors, but at the same time have serious repercussions for the financial models used by pharmacies. On April 7, 2010, the Ontario Ministry of Health and Long Term Care announced the following proposed changes to the Ontario drug system effective May 15, 2010.

(Legislation introduction has been delayed pending negotiations with Pharmacy association, revised introduction end of spring 2010 )

The province of Ontario has put forth proposed regulations effective May 15, 2010 which will result in:

• Lowering the pricing for generic drugs to 25 per cent of the cost of the original brand name drug in a phased in basis by 2012, however these revisions currently as proposed only apply to drugs that are on the ODB list which limits the savings to private plans.

• Eliminating the professional allowances paid to pharmacies by generic drug manufacturers by 2013

• Raising the allowable dispensing fee that pharmacies can charge for their dispensing services under the “ODB” Program for seniors

• Capping the amount of the drug ingredient mark-up paid to pharmacies for ODB prescriptions at 8%

• Investing of $100 million in additional funding by the province to pay pharmacies for providing professional services to patients

Summary of Changes to Employer Sponsored Benefit Plans

1. Generic Drug Pricing – Beginning May 15, 2010

For generic drugs purchased out-of-pocket or through private employer health plans, prices will be reduced to 25 per cent of the cost of the original brand name drug, but this will occur in stages over a two-year time period. The price decreases will be phased in as follows:

• Effective May 15, 2010, reduced to 50 per cent of brand name drug price

• Effective April 1, 2011, reduced to 35 per cent of brand name drug price

• Effective April 1, 2012 reduced to 25 per cent of brand name drug price.

2. Phasing out of professional allowances

Professional allowances are payments generic drug companies make to pharmacy owners for stocking their prescription drug products. These payments currently make up a significant percentage of the cost of generic drugs. There is no cap on professional fees for the private sector.

For generic drugs purchased out-of-pocket or through private employer health plans, professional allowances will be phased out and completely eliminated by 2013 as follows:

• Effective May 15, 2010, capped at 50 per cent

• Effective April 1, 2011, capped at 35 per cent

• Effective April 1, 2012 capped at 25 per cent

• Effective April 1, 2013 reduced to 0 per cent.

3. Increase to dispensing fees under Ontario Drug Benefit Plan

Effective May 15, 2010, the province will increase the dispensing fees paid under the Ontario Drug Benefit plan to $8 per prescription, from the current $7. In rural areas, the Ontario Drug Benefit Plan dispensing fee will be increased to $11. In addition, there will be a further increase to these dispensing fees of 2.5 per cent each year for the next five years.

These increases are designed to partially compensate pharmacies for revenue lost due to the elimination of professional allowances, and to more directly tie compensation to the services that pharmacies provide.

4. Cap on markup for ODB drugs

While the cap on the markup for Ontario Drug Benefit program prescriptions will remain at 8%, this markup is now subject to a dollar limit of $125 per prescription (which will come into play for higher-cost drugs only). This cap applies to drugs paid by the provincial program only. There is no cap imposed on the markup for drugs paid by private health plans or individuals.

5. Professional services

The province has committed an additional $100 million to be used to compensate pharmacies for additional services provided to patients, and to support pharmacies in rural and under-serviced areas. This funding is in addition to the $50 million currently used for the MedsCheck program.

Impact to your benefit program

The changes to the Ontario drug system are significant – and all details have not yet been confirmed by the government.

Based on our initial analysis we expect the reduction in generic drug costs may result in reduced claim costs for those plans that include mandatory generic substitution, however, the reduced revenues from generic drugs and elimination of pharmacy professional allowances will likely see pharmacies dispensing fees increased significantly in reaction to this lost revenue.

In order to gain full advantage of the proposed changes, we recommend a review of your drug plan to ensure that they include the following provisions:

1. If not already doing so, implement a prescription drug card so as that the pharmacy markups may be monitored and limited. Drug cards also offer greater flexibility in plan design and claims reporting.

2. With the government’s aggressive approach to pricing on generic drugs versus brand name, implement a mandatory generic provision on the drug plan, such that the plan pays up to the cost of the generic drug whether or not the patient is dispensed that drug or the physician has indicated “no substitution” on the prescription.

3. Limit the dollar value of the dispensing fee which will be eligible under your drug plan to insulate your plan from expected increases in dispensing fees. The Leslie Group in partnership with Loblaw Companies Limited (includes Zehrs, Fortinos, No Frills, Real Canadian Superstore etc.), is able to offer a preferred dispensing fee arrangement to employees and their eligible dependents who use their Pay Direct drug card.

Currently they will be charged a preferred dispensing fee of $7.99 in Ontario (subject to change), which represents a significant discount from standard dispensing fees in Ontario (typically ranges from $9.99 to $13.45 per prescription). While we expect the preferred dispensing fee to increase as a result of this change to the drug system, the preferred dispensing fee arrangement will continue to be competitive as we expect all pharmacies in Ontario to raise their dispensing fees. Our preferred pharmacy arrangement is provided at over 500 locations across Canada and approximately 300 are located in Ontario providing you and your employee’s reasonable access to lower dispensing cost fees. In addition Loblaws has publicly indicated that they plan to add more pharmacy locations in the 500 stores they currently operate that presently do not offer pharmacy services.

We are closely monitoring this issue and the impact on your plan and your plan members. At a minimum, for your group insurance renewal we also expect these changes will have a positive impact on drug inflation trend factors provided that your plan includes the provisions mentioned above. As part of your renewal process we will review the appropriate plan design options to minimize the impact. We are concerned that these changes will result in a significant reduction of pharmacy locations in Ontario (20% to 50%), which could limit access for residents outside of major centers. We anticipate these changes will hit small independent pharmacies the hardest and this will likely be the ones that are not able to survive going forward. In addition store hours and services that were previously free may now incur a fee (i.e. free delivery, bundle packs). We anticipate that some of the savings will result in increased out of pocket costs to Ontario residents.

For additional information on the Ontario drug reforms, please visit the Ontario government Web site at www.ontario.ca/drugreforms.

The Leslie Group is a full service benefits consulting firm that is, in keeping w ith market conditions and legislative changes, committed to providing you with the best advice needed to manage your group benefits program. We would be pleased to address any questions and can be reached at (416) 510-8966.

Harmonized Sales Tax Impact on Group Benefits

2010-10-21T13:12:39-04:00

Harmonized Sales Tax (HST)

Impact on Group Benefits

The new HST covers new (Ontario and British Columbia) and increased (Nova Scotia) Harmonized Sales Taxes effective July 1, 2010.

Ontario: HST will be 13% (ON portion 8% plus 5% GST)
British Columbia: HST will be 12% (BC portion 7% plus 5% GST)
Nova Scotia: HST will be 15% (Increase of 2% over current 13% rate)

Tax change questions on the impact on Group Insurance Programs:

1. Have the tax rules been finalized at this date?

Most of the required legislation governing the application of HST to employee benefit plans has been introduced, although technical issues have been identified by the insurance industry that are being raised with the appropriate government officials.

It is our understanding that the applicable tax rate will be determined by the clients billing address, in most cases, but we will update or correct information if circumstances change.

2. Are all Group Benefits plans affected by the new Harmonized Sales Tax in Ontario and B.C.?

Administrative Services Only (ASO) plans without an insurance component and other fee-for-service type of products will continue to attract HST but more plans will be impacted now that the tax will take effect in Ontario and BC. The GST/HST will not apply to insured plan premiums.

3. If a benefits plan is charged GST currently, will it be subject to HST?

Yes, if the billing address is in one of the participating provinces (ON, BC, NS, NB, NL) HST will be applicable.

4. If a benefits plan is currently charged Retail Sales Tax in Ontario, will it attract HST?

No, in general, a benefit plan currently subject to Retail Sales Tax in Ontario will not attract HST. However, this is not the case for a pure ASO plan. Pure ASO plans that are currently subject to Retail Sales Tax in Ontario will attract HST on the administrative fee portion. It is important to note that the Retail Sales Tax in Ontario will continue to be charged on premiums for insured plans. There are no changes to these rules at this time.

5. What other types of benefit plans will be impacted by the HST?

There are a number of benefits that may be included in a benefit plan that are subject to HST. Employee Assistance Plans (EAP), executive medicals (Medcan), third party disability management services are examples of programs that are currently subject to GST and effective July 1, 2010 will be subject to the 13% HST.

6. What changes will B.C. plan sponsors see?

Based on the information above, B.C. plan sponsors who currently pay GST on some aspect of their plan will attract HST. B.C. does not currently apply PST to insured plans.

7. How will the tax apply if a plan has members in more than one province?

Provinces now have various tax systems and rates. Based on a federal government general rule announced in February and introduced April 30, the tax will be assessed on the billing address associated with any given bill.

Example:

A client with a head office and billing address in Ontario will be charged 13% HST on
the ASO fees. A client in Alberta will be charged 5% GST. For a client with multiple billing addresses, each bill will carry itsown rate based on province of the individual
billing address.

8. How many provinces will have HST after July 1?

HST will be applicable in Newfoundland and Labrador, Nova Scotia, New Brunswick, Ontario and British Columbia. Quebec has its own version of a harmonized tax that results in two taxes being applied – the GST and the Provincial QST (also known as TVQ).

9. Will these provinces all work under the same HST billing rules?

All provinces with HST, as well as Quebec, will apply the billing address rule mentioned above.

10. Will tax submission to the government change?

HST is administered by the federal government. The provincial component of the HST for Ontario and B.C. will now be submitted to the federal government along with other GST and HST.

11. Will input tax credits apply?

Most groups will be able to claim input tax credits or rebates for the new HST. However, since some groups will be unable to claim input tax credits, business owners should contact their tax specialist to understand how these will apply to their business.

12. Consultant/Advisor fee charges to clients are they impacted by HST?

Only the fees charged on a fee for service basis which are currently subject to GST are impacted, and the tax applicable will rise from 5% to 13% for these services. The fees that are built into an insured plan rate structure are not subject to HST and are currently not subject to GST.

Tax Change Questions on the impact on Group Retirement Plans:

• Expenses charged to investment funds and all investment management and advisory fees are subject to HST in Ontario, B.C., Nova Scotia, New Brunswick and Newfoundland and Labrador.

• HST applies to GST-taxable services that are charged to investment funds as well as any investment management or advisory fees that are paid outside of the fund

• HST applies to other services already subject to GST; for example annual trustee fees for RRSP’s and DPSP’s and any member administrative fees billed to the employer

• A higher tax rate for investment funds means that the funds incur an increase in costs, and so will sponsors and members, where these costs are paid by them.

Summary

HST will not impact the majority of group insurance plans that are fully insured. The area of impact is in the administration fee for Pure ASO (self insured plans) plans which are already subject to GST and typically represents a small portion of the overall plans costs as well as services that are provided (i.e. EAP) that are currently subject to GST. In addition HST will have an impact on retirement plan investment
management and administrative fees.

Only half of the increase will be felt in 2010, due to the timing of the change. Exact details on how HST is applied to the above services aren’t fully known and the government has yet to publish the final regulations. We’ll update you further once the details are confirmed.

The Leslie Group is a full service employee benefit consulting firm that is, in keeping with the market conditions and legislative changes, committed to providing you the best advice needed to manage your groups benefits program.

Should you have any questions or require clarification please contact The Leslie Group Limited at (416) 510-8966.

Privacy Rules Complicate Short Term Disability

2010-10-14T17:06:53-04:00

Many employers have also had to deal with a relatively new benefit challenge for relating to the administration and adjudication restraints placed upon self-funded, short-term disability salary continuance plans.

In essence, developments in privacy legislation severely restrict an employer’s ability to adjudicate claims due to limitations regarding access to employee medical information.

Most small and mid-sized employers do not have trained medical personnel on staff or on contract. These employers are, therefore, ill-equipped to act as claims adjudicators, and the current regulatory environment on privacy makes them “claims payers only” in self-funded arrangements.

In response many small and mid-sized employers have had to retain the services of an insurer or another third party professional to act as the claims adjudicator. Such arm’s length providers offer two critical services that an employer cannot provide: access to confidential medical information for the purpose of claim settlement, and medical modelling expertise in order to adjudicate claims.

Each sponsor will have to take the time and make the effort to explore all of the factors to come up with the best possible solution for that organization.

This article was taken and revised from the December 20, 2004 edition of Canadian HR Reporter

The Leslie Group Limited is able to assist in the review of your salary continuation plan and the implementation of a third party adjudicator. Please contact us if you require assistance in this area.

The Leslie Group Limited

The Leslie Group is a full service benefits consulting firm that is, in keeping w ith market conditions and legislative changes, committed to providing you with the best advice needed to manage your group benefits program. We would be pleased to address any questions and can be reached at (416) 510-8966.

Group Insurance - To self-insure or not, that is the question

2010-10-14T17:06:48-04:00

If yes, sponsors bear greater financial liability

Among the many challenges facing HR departments, one of the most common and challenging is how to rein in the rising costs of employee benefits.

In 2009, once again, group benefit plan renewals have been characterized by double-digit health and dental inflation and utilization factors.

With health and dental benefits representing the lion's share of group benefit costs - anywhere from 60 to 80 percent and group benefit plans costing up to eight percent of payroll, organizations are increasingly compelled to look for ways to reduce these mounting costs.

While most have opted to make changes in plan designs and introduce cost-sharing arrangements, others are exploring the option of changing their funding arrangement and are asking themselves, "Should we insure or self-insure?"

What does it mean to self-insure?

Self-insured benefits are also known as self-funded or ASO benefits - administrative services only. In this type of funding arrangement, an organization contracts with an insurance company or a third-party administrator to adjudicate and pay group benefit claims on its behalf - hence, administrative services only.

In an insured arrangement, the financial liability for benefit payments rests solely with the insurance company and the risk is fully borne by the insurance company. Both the financial liability and risk are completely transferred to the plan sponsor on an ASO basis.

Why self-insure?

Historically, organizations going the self-insured route have been motivated to do so by cost savings from the elimination of premium tax, which only applied to insured plans.

However, in Ontario, Quebec and Newfoundland, this cost advantage disappeared in the 1990s when those governments introduced premium taxes on group benefit plans regardless of funding basis.

Depending on the province or jurisdiction, savings from the elimination of premium tax range from two percent to 3.5 percent of the plan's net premium (premium less any refund). Ontario does not permit the elimination of premium tax utilizing ASO funding.

Another source of savings is the elimination of risk charges since the organization now bears the risk. Depending on the type of benefit and the size of the plan, this option has the potential to save an organization anywhere from 0.5 percent to two percent of the plan's premium.

Lastly, there's the elimination of the insurance company's requirement to hold reserves such as the Incurred But Not Reported (IBNR) reserves, and Claims Fluctuation Reserves (CFR), however many insurers on TPA’s (Third Party Administrators) require a float on deposit.

There is currently no legislation that requires organizations that are self-insuring to fund "reserves" and so the freed up funds can be used for whatever purpose the organization wants.

Group Insurance Funding ASO – Balancing Risk Against Reward

2010-10-14T17:06:44-04:00

As employers look for ways to reduce the cost of providing benefits, they have increasingly self-insured a greater portion of risk through administrative services only (ASO) arrangements. Today, health, dental, and short-term disability (STD) are commonly provided on an ASO basis for large employers.

The use of ASO plans has grown since the concept first arrived on the Canadian market in the 1970's. At the end of 2009 some 9 million Canadians have extended healthcare and/or dental care expenses under an ASO arrangement.

ASO plans offer distinct advantages for some employers, but these perks must be carefully weighed against the dangers inherent in these plans. Under an ASO arrangement, organizations provide benefits to employees on a self-insured or uninsured basis. Often insurance companies and third party administrators (TPA's) administer the plan and provide claims adjudication and payment services.

The term 'self-insured' is a misnomer though, because there is no insurance element or risk-sharing aspect to ASO arrangements. Since plans are not insured, insurance companies do not guarantee benefits or costs for ASO plans. So why do these plans continue to grow in popularity? The attraction lies largely in the potential savings.

With the exception of Ontario, Quebec and Newfoundland, ASO plans are not subject to premium tax applied to insurance. ASO arrangements eliminate the need for the risk charge, which typically ranges from 0.5% to 1.50%.

Bringing reserves in-house is also regarded as an advantage because many plan sponsors with ASO arrangements believe the funds can be invested at a higher yield than offered by insurance companies or TPA'S. These savings can also be reinvested in the business. In addition to the potential savings, ASO plans can usually offer greater flexibility than insured arrangements. For example, the employer can alter coverage without having to negotiate amendments with the insurer provided that the plan meets the Private Health Services Plan limits in the Income
Tax Act.

ASO isn't for every employer, nor is it suitable for every benefit. If proper precautions are not taken, the end result could be devastating for both the employer and the employee. It's for that reason that ASO plans are more appropriately offered on health, dental and short-term disability benefits since these claims are frequent, relatively small and fairly predictable, thereby minimizing the risk taken on by the employer. Notice I said minimizing the risk. With an increasing number of expensive drugs and greater availability of life sustaining medical equipment entering the marketplace, the risk associated with self-insuring cannot be overlooked.

However, there are options available to both small and large organizations that help to mitigate this risk. Employers can purchase stop loss pooling from their insurance provider, a feature that limits claims to a dollar amount that the company can handle. Plan sponsors can also redesign their plans to reduce the amount of benefit coverage. Employers who choose to do the administration themselves need to know that they could be running afoul of Federal Privacy Laws. They also run the risk of creating the perception that only some employees need to go on to the plan. If the perception by plan members is that the employer is the one who chooses who goes on to
the plan, this could lead to adversarial relationships and litigation. Choosing to place the administration in the hands of an insurance company provides a buffer between the employer and its employees, improving the likelihood that proper administration with defined guidelines will be followed.

In Canada, there has been little regulation of self-insured plans. There is no requirement that employers set aside adequate reserves to cover future liabilities arising from these plans. If reserves are set aside, there is no restriction on how those funds are invested. There is also no obligation to keep funds in trust to protect them from creditors. This means that a bankruptcy could spell the end of the benefits plan, including benefits for individuals who may be on a short-term disability, even a long-term disability should it happen that the employer also self-insures this.

In 1988, Canada caught its first glimpse of what happens when a large employer that self-insures its own disabilityplan runs into financial difficulty. When Massey Combines Corp. went into receivership some of the hardest hit victims were workers collecting payments under the company's LTD plan. More than 350 employees saw their disability payments vanish.

Many in the industry thought this case would prompt government to pass legislation regulating the use of ASO plans. But nothing was done. And 10 years later in 1998, along came the Eaton case. While administered by an insurer on an ASO basis, the Eaton's LTD plan was self-insured and, unfortunately, unfunded. When Eaton filed for bankruptcy protection its disability plan ceased to exist.

The government of Alberta decided that this should never again happen in their province. Alberta changed their insurance regulations to place limitations on the amount of uninsured disability benefit that could be in place. Under their rules, disability benefits payable beyond two years to Alberta residents are subject to the Insurance Act and those benefits must be insured. Self-insured disability plans are still permitted, but they are only allowed to provide benefits for a maximum period of two years on an uninsured basis. This requirement applies to any plan covering one or more residents of Alberta, regardless of the jurisdiction in which the plan was established. For national and multi-provincial plans, the limitations apply to Alberta members only.

Administrative Services Only plans offer flexibility, choice, and costs savings. They aren't the perfect panacea, but for the well informed plan sponsor who understands the limitations of ASO, the risk may very well be worth the reward.

This article was taken and edited for content from the October 2006 Insights Bulletin.

The Leslie Group is a full service benefits consulting firm that is, in keeping with market conditions and legislative changes, committed to providing you with the best advice needed to manage your group benefits program. We would be pleased to address any questions and can be reached at (416) 510-8966.