To say that COVID-19 has upended our lives in a relative blink of an eye would be an understatement. This new infectious disease is throwing Canadian businesses into uncharted territory, again and again, on both sides of the “essential services” line. And in the face of these uncertainties, which will persist for weeks and likely months to come, we remind you to never hesitate to ask for more help from your benefits advisor.
“We are working at full tilt to help our clients deal with so many situations, all of them evolving, and our priority throughout is to reassure them that we are with them every step of the way,” said Robert Houle, vice-president of CAPCORP Financial Corporation in Ottawa, Ontario.
As a member of THE BENEFITS ALLIANCE GROUP, your advisor can draw upon resources and advocate in ways that would be difficult for firms that are on their own. “We bring a common voice so that we can work more efficiently with our partners and suppliers,” said Houle.
Benefits Alliance (BA) serves as a channel for sharing information and best practices so that all 28 member firms across Canada—and their more than 7,500 clients—can benefit more quickly from interactions with insurance carriers, other providers and regulators. Webinars and tools such as the Slack platform facilitate cross-communications between members.
“We are able to share resources and what we’ve learned,” said Amar Munjal, consultant at CapriCMW in Burnaby, B.C., and a member of BA’s group retirement services committee. For example, BA’s collective voice is an advantage for employers struggling to maintain defined contribution (DC) pension plans during the economic shutdown.
“We can go to the regulators directly. A lot of advisors would otherwise be reliant on their insurers for answers, which takes more time. But some employers literally can’t afford to wait,” said Munjal.
The month of May will continue to be survival mode for many small to mid-size businesses across Canada. At the same time, we can expect to start learning of the federal and provincial governments’ plans to slowly and carefully reopen the economy. Here is a recap of where things stand today, in early May, to help you take your bearings and determine next steps.
And remember to contact your benefits advisor for more information or direct support on any of these topics, or on issues unique to your organization.
Payroll
Rehiring employees – Now that the CANADA EMERGENCY WAGE SUBSIDY (CEWS) is in place, some employers may be in a position to bring employees back on full payroll. Laid-off employees need to be re-hired and put back on payroll in order to be eligible. For more on CEWS, see below under “Government aid.”
Health benefit plans
Grace periods – Insurers are offering grace periods for premium payments for benefits that have essentially become inactive, such as dental and paramedical services. Plan sponsors that are especially hard hit can get an extra 60 or even 90 days to remit their premiums.
Premium reductions and credits – Insurers have recognized that plan members cannot receive dental or paramedical services since these providers have had to close their businesses. Insurers will credit premiums for their group insurance customers, which will provide some cost relief to businesses and their employees.
Extended disability – For laid-off employees, insurers have extended disability benefits by 30 or 60 days. However, the federal government’s Canada Emergency Response Benefit (CERB) is available for up to 16 weeks. BA is working with insurers to synchronize the time periods.
Drug dispensing fees – As part of efforts to prevent stockpiling, provincial pharmacy regulators have requested or required pharmacies to limit refills on prescription drugs to 30 days rather than the usual 60 or 90 days. Dispensing-fee costs will therefore double or triple—and the policy will likely continue for months, given the high risk of disruptions in the drug-supply chain. The Benefits Alliance Group continues to monitor developments in this area and advocate for solutions to mitigate the cost impact on group plans.
The future of health benefits – This is not something we can know any time soon, but the COVID-19 crisis has essentially hit the pause button on all facets of life, noted Houle. Our eventual “new normal” is also an opportunity to rethink what’s important and how to deliver products and services. “We are not going to go back to where we were February 2020. Instead should be thinking about where we are going to be in February 2022,” said Houle.
When it comes to health benefit plans, he envisions a greater push for flexibility—and not just for employees (for example, in the form of health spending accounts). Plan designs can be more nimble and responsive to the needs of the employer as well as the employee, by incorporating new technologies and offerings from new, potentially innovative, providers.
Retirement savings
Market recovery – The first weeks of the COVID-19 pandemic will forever remain a blur in Munjal’s memory. “When the markets declined at the speeds that they did, the level of anxiety skyrocketed. I spent most of my time speaking with plan members, calming them down.” He and other BA advisors believe that most plan members did hold the course on their investment strategies, though he recommends ongoing education. “This is a good time to reinforce the fundamentals of investments.”
Withdrawal rules – Plan sponsors who have had to lay off employees or reduce their hours can temporarily relax withdrawal rules so that employees can more easily access their savings in group registered retirement savings plans (RRSPs), deferred profit-sharing plans (DPSPs) or tax-free savings accounts (TFSAs). “This could be highly valued by employees facing financial hardship,” said Munjal.
Employer contributions – The month of May could mark a turning point for plan sponsors with DC pension plans. “When your revenue has been decimated, you need to cut expenses as soon as possible wherever you can. But current DC regulations require employers to give 30 or 45 days’ notice before reducing contributions. That’s too late. They may decide to wind up their plan instead,” said Munjal.
In early May several BA clients will have received decisions from their provincial regulator in response to applications to reduce their contributions to 1% or zero, effective immediately. Those decisions “will set a precedent in that province, and guide our recommendations for other clients,” noted Munjal.
Plan sponsors with group RRSPs, DPSPs or TFSAs have much greater flexibility when it comes to reducing or suspending their contributions. “This is something in their toolbelt they can deploy at any time,” said Munjal.
The future of retirement savings – Unfortunately, COVID-19 has revealed that financial literacy in Canada is “abysmal,” said Houle. “Too many Canadians are one pay cheque away from bankruptcy.” As a result, he predicts retirement savings will take a step back, for two reasons. First, it will take time for people to recover from taking on more credit, postponing payments, etc. Second, because education needs to get back to basics. “People need to save three months’ salary as a financial cushion. Hopefully this crisis will finally bring that message home,” said Houle.
When it comes to retirement savings programs, Munjal fears a migration away from DC pension plans when these plans still have merit. “I saw a lot of that after the financial crisis in 2007 and 2008 because employers wanted immediate relief and the regulators stuck to the script,” he recalled. While the regulations are there to protect employees, they were developed with defined-benefit plans in mind and need to be updated. “Plan sponsors want to do the right thing by their employees, but they need flexibility in order to be able respond to situations like the one we’re in right now.”
Mental health
Anxiety and depression are undoubtedly on the rise during these uncertain times. For plan sponsors with an employee assistance program, be sure to promote its services and self-help apps, many of which are available at no cost. The following resources may also be worth tapping into:
WORKPLACE STRATEGIES FOR MENTAL HEALTH, which regularly posts content specific to supporting employees and management during the pandemic. This edition of TAKE 5 FOR HEALTH BENEFITS includes an article about Workplace Strategies.
CANADIAN MENTAL HEALTH ASSOCIATION has local branches that may be able to work directly with employers, and its website includes content about coping with COVID-19
Government aid
By now the federal government has fully implemented most of its financial aid programs for businesses and employees. Here’s the full list and links for details:
CANADA REVENUE AGENCY
- Summary of changes to taxes and benefits
CANADA EMERGENCY WAGE SUBSIDY (CEWS)
- 75% wage subsidy to eligible employers for up to 12 weeks (until June 6), retroactive to March 15; CLICK HERE TO CALCULATE YOUR SUBSIDY
- Issues to be resolved include the possible expansion of CEWS to refund employer contributions to unemployment insurance and government pension plans (e.g., Canadian Pension Plan), and whether the business owner’s salary qualifies for a subsidy.
- Applications are typically processed within 10 business days, and employers can expect to receive subsidies starting May 7
CANADA EMERGENCY RESPONSE BENEFIT (CERB)
- Direct payment to eligible employees of $2,000 for a four-week period for up to 16 weeks; employees can also earn up to $1,000 before taxes and still be eligible
Canada Emergency Commercial Rent Assistance (CECRA)
- Program announced on April 24 and expected to be operational by mid-May; CLICK HERE FOR CURRENT AVAILABLE DETAILS FROM THE PRESS RELEASE.
- Qualifying commercial property owners will receive forgivable loans to cover 50% of rent payable by eligible small business tenants for the months of April, May and June. The loans will be forgiven if the property owner reduces tenants’ rent by at least 75%. The tenant will cover the remainder, up to 25%. The property owner will then pay 25% and the federal government and provinces will share the remaining 50%.
10% WAGE SUBSIDY
- 10% of remuneration paid from March 18 to June 19 up to maximum of $1,375 per eligible employee and $25,000 per employer
- For employers also eligible for CEWS, any benefit from the 10% wage subsidy reduces the amount available to be claimed from CEWS
WORK-SHARING
- Income support for employees eligible for EI who agree to reduce normal working hours due to developments beyond control of their employers
- Extended from 38 weeks to 76 weeks for employers affected by COVID-19
- For employers also eligible for CEWS, EI benefits received by employees through Work-Sharing reduce the benefit that the employer is entitled to receive from CEWS
CANADA SUMMER JOBS
- For the 2020 program, an increased subsidy of up to 100% of the minimum wage
BUSINESS CREDIT AVAILABILITY PROGRAM
- Relief capital programs for from Export Development Canada (EDC) and Business Development Bank of Canada (BDC), including BDC COVID-19 WORKING CAPITAL LOANS
This article is part of The Benefits Alliance Take 5 for Health Benefits. Take 5 is a quarterly initiative that provides a deeper look a the employee benefits space by providing examples, research and case studies on what’s working for employers in Canada.