Morneau Shepell accounting assumptions survey for Ontario hospital post-retirement benefits
Morneau Shepell recently conducted a survey of accounting assumptions for over sixty Ontario hospitals with respect to their post-retirement medical and dental benefit provisions. Assumptions in the survey include retirement age, benefit take-up rates, and percentage retiring with a covered spouse or dependent. These assumptions are set by hospital management based on a combination of recent experience and forward-looking expectations. Medical and dental coverage for retirees generally expire at age 65 for most hospital workers.
Some key findings of the survey are as follows:
- Despite trends of Canadian workers retiring at later ages, the most common retirement age assumption for hospital workers is age 60. This is likely heavily influenced by the employees’ pension plan early retirement incentives.
- Cost sharing arrangements of retiree medical plans have a high degree of influence on the voluntary take-up rates of coverage. Interestingly, when benefits are fully paid for by the retiree, it is expected that half of them will participate in the plan. This relatively high rate demonstrates the need for cost certainty amongst pre-age 65 retirees with respect to their medical and dental retiree coverage.
- Most retirees are expected to elect a covered spouse or dependent at retirement, with an average assumption of 65%. However, there is a wide range from hospital to hospital with this assumption, as it varies from 45% to 100%electing family coverage at retirement. This shows us that not every hospital has the same demographic profile and highlights the importance of our work in helping our hospital clients select customized best-estimate accounting assumptions.
This survey will allow hospitals in Ontario to benchmark their post-retirement benefit accounting assumptions in comparison to their industry. Morneau Shepell will be performing this survey annually and over time we expect that the results will reveal more demographic trends.