Research
what Canadian companies have been doing in recent years in response to rising
post-employment health care costs and the risks that are associated with
defined benefit pension plans. Write a short report on your findings.
The following is a summary of
what Canadian companies have been doing in recent years in response to rising
post-employment health-care costs and the risks that are associated with
defined benefit pension plans.
(a) Elimination of retiree benefits:
·
The most drastic way.
·
Significant employee discontent is likely.
·
Unilaterally reducing or eliminating post-retirement
benefits may prompt retirees and/or active employees to bring an action against
the employer.
·
Reserving the right to amend or terminate post-retirement
benefits is expressly needed.
·
An employer may consider providing employees with a
lump-sum payment in exchange for the elimination or reduction of
post-retirement benefits.
·
(b) Stricter eligibility requirements:
·
Imposing more stringent eligibility requirements with
respect to new hires will have little impact on an employer’s present bottom
line since new hires generally do not reach retirement age for quite some time.
·
(c) Capping of benefits.
(d) Switching to defined contribution:
·
Employees would be taking on more risk but continue to be
protected against catastrophic expenses.
·
Employees could manage their share of the risk by adjusting
future contribution and coverage levels to match their personal situation.
