Canadian employers know that their employees value benefit plans. Employer-sponsored plans often provide additional benefit coverage to employees beyond the basic medical treatment covered under the universal health care system. Every employer’s benefit plan may be different—some include mandatory benefit programs that do not allow employees to opt out while others may only allow opt-outs of specific plan elements. Employers must follow the law and plan rules, but when can employers mandate employees join a group benefit plan, and when can employees opt out?
Mandating Participation in Benefit Plans
Canadian insurance guidelines indicate employees should participate in the health benefits offered by their employer unless they have coverage elsewhere (e.g., through a spouse’s plan). Though employees can purchase separate private health coverage as a supplement and utilize their government coverage as it applies, they must still participate in the employer plan if it is offered. There are limited circumstances when opt-outs are allowed.
Opting Out
Why would an employee want to opt out of additional benefits? They may want to opt-out if they do not want to make the financial contribution for additional coverage. Additional family coverage can cost employees as much as $1,000 per year. According to a Conference Board of Canada survey, roughly half of organizations surveyed (54%) allow employees to opt out of some or all elements of the benefit plan in certain instances.
There are only two instances where employees may be allowed to opt out:
- During a leave-of-absence. If an employee is on disability, maternity, or some other type of leave where they cannot be physically present at work, they can opt out of coverage during that time. If the employee returns to work, coverage and contributions resume. 52% of employers allow employees to opt-out of coverage while on leave.
- When there is comparable coverage elsewhere. An employee may have a spouse whose employer also offers employer-sponsored health benefits. If the employee’s spouse pays less money and has better coverage, then the employee may opt out of their own employer’s plan in favor of the benefits offered by their spouse’s employer. 80% of employers allow employees to opt out of the plan when they have comparable coverage elsewhere.
It is ultimately up to the employer to decide which elements of the plan employees are permitted to opt out of, whether it be extended health, dental, life insurance, disability or other coverage.
What Employees Should Know
If an employer allows opt-outs, they should remind employees of two important points:
- Opting out is not always permanent. If, for example, the spouse who provided the insurance coverage loses their job, then the employee has 30 days to notify their own employer about the change and rejoin the plan.
- Opting out creates a component of risk. If a health issue arises after an employee opts-out, a medical examination may be required when re-applying for coverage. An employee with a pre-existing medical condition may not be approved to re-join the plan.
Bottom Line
By Canadian law, employees are required to join a benefit plan offered by their employer. However, there may be exceptions where employees can choose to opt out of the plan. If you are managing a group benefit plan in Canada, communication is key to make sure your participants are aware of these options and can make the best decision for their circumstances.
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Amanda Wilke, CEBS
Information/Research Specialist at the International Foundation
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