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Employer Action Code: Analyze

Health and pension coverage extended for dismissed employees

Effective July 1, 2009, an amendment to the ANI (Accord National Interprofessionnel) has provided workers leaving an organization with the option to keep the health insurance and pension benefits that were provided to them during their period of unemployment.

Although this currently only applies to employers who are affiliated with members of union organizations that have signed the ANI, it is expected that the ANI will soon be extended to all companies. Accordingly, it is highly recommended that all employers anticipate and plan for this change.

Key Details

This amendment has the following main features:

• Extended benefits are available to all employees, including those on short-term contracts, who have worked with their current employer for at least a month, and who currently participate in the company benefit plans.
• Coverage will be extended for a period of time equal to the employee’s employment contract, up to maximum of 9 months.
• Employees may refuse the coverage if they choose. To do so, they must provide written notice of this decision to their employer within 10 days of the termination of their employment.
• Post-retirement health benefits will also be available to those employees who retire after leaving the company.

These benefits will be funded by sharing the cost of contributions between the employer and former employee, or by a previously agreed-upon method defined by a collective agreement. For each affected employee, Watson Wyatt estimates the additional cost to employers to be only around 3 percent of pay for the nine months.

Because it will only apply when employees leave service, not when they retire, and given the short period of coverage extension, the impact of this change on IAS19 pension regulations is not expected to be significant. 

Employers’ costs may also rise due to the provision of post-retirement medical benefits: While the cost of this coverage will be borne by retiree up to 150 percent of the total contributions paid while they were employed, if this coverage is not sufficient, insurers may look to mutualize active employee and retiree contracts, which would mean cost-sharing between employers and retirees.
 

September, 2009

The information included in this report is general information only and should not be relied upon without further review by the appropriate professional advisers. Watson Wyatt is not a law firm or an accounting firm and is not engaged in providing legal, accounting or tax services or advice.