Understanding Your Benefits as You Age: What Changes at 65 and How to Plan
Working past age 65 is increasingly common in Ontario. Whether you’re remaining in your career by choice, necessity, or a combination of both, understanding how your benefits change at this inflection point is essential to financial planning and workplace decision-making. Similarly, if you’re an employer managing an aging workforce, understanding pension and benefits architecture at age 65 helps you communicate clearly with employees and design benefit programs that are both sustainable and fair.
The key insight from recent Ontario law on this topic is straightforward: certain benefits are structured to phase out or change substantially when employees reach age 65, primarily because that is the age at which most employees become eligible for retirement income from public and workplace pensions. However, the law places limits on age-based benefit reductions and requires employers to design benefits carefully to comply with human rights protections. This blog explains what typically changes at 65, why the law permits certain changes, what exceptions and protections apply, and what you should do to plan ahead.
Long-Term Disability (LTD) Benefits: Most employer LTD plans terminate coverage at age 65. This is because LTD is designed as income replacement for lost wages, and at age 65, employees typically become eligible for unreduced Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, which serve the same income-replacement function. Employees can verify their CPP eligibility and estimated benefits through Service Canada and OAS eligibility at Canada.ca.
In most Ontario workplaces, if an employee is receiving wages and become disabled after age 65, they will not have employer-sponsored LTD coverage to replace that income.
Extended Health and Dental Coverage: Some employer plans continue extended health and dental coverage past age 65, while others do not. This varies significantly by employer and plan design. Some employers shift to a different benefit structure (e.g., a defined contribution or flexible benefits approach) at age 65, allowing employees to direct benefit credits toward coverage of their choice. Others maintain the same benefits throughout employment.
Life Insurance: Group life insurance is often reduced or eliminated at age 65, reflecting the employer’s assessment of risk and changing coverage needs as employees transition toward retirement. However, some plans maintain life insurance throughout employment or offer a conversion option to individual coverage.
Pension Plan Participation: If you participate in a defined-benefit pension plan, benefit accrual (the earning of additional pension credits) may cease at age 65 in some plans, though this varies. If you participate in a defined-contribution plan, or a Company RRSP program, contributions may continue past age 65, unless the plan document specifies otherwise.
Age 65 is significant in Ontario employment and benefits law for several reasons:
- Retirement Income Eligibility: CPP can be taken as early as age 60 (at a reduced rate) or as late as age 70 (at an enhanced rate), with age 65 representing the point at which full unreduced benefits are available. OAS eligibility begins at age 65. Workplace pensions are often designed with age 65 as a reference point for unreduced pension eligibility. Because these public and workplace pensions become available at 65, the rationale for employer-sponsored income replacement benefits (like LTD) becomes less compelling.
- Historical Mandatory Retirement Age: Mandatory retirement at age 65 was legal in Ontario until 2005. Although mandatory retirement was eliminated, age 65 remains a significant milestone in Canadian employment culture and law. Some benefit design choices reflect this historical context**.**
- Human Rights Protection: While age discrimination in employment is illegal, Ontario law does permit certain age-based distinctions in specific benefits contexts, particularly for benefits that serve a wage-replacement function. The law does not, however, permit blanket age-based cuts to all benefits; each benefit type requires separate analysis.
Strategic Implications for Employers
Key Takeaway: Design benefits carefully with clear documentation of the rationale for age-based provisions. Communicate changes transparently to employees nearing 65, and ensure that changes comply with human rights requirements and your plan documents.
1. Transparent Communication Is Essential
If your benefit plan includes age-based provisions (such as LTD termination at 65), employees have a right to understand this well before reaching that age. Many employees first learn at age 65 that their LTD coverage is ending, which creates surprise and potential resentment. Clear communication is a key part of good employment contract practices and workforce management.
Best practices:
- Provide all employees with clear summaries of their benefit coverage, including any age-based changes
- When an employee approaches age 65, proactively communicate what benefits will change and why
- Explain the rationale (e.g., “LTD coverage terminates at 65, because CPP and OAS become available; the plan is designed to provide income replacement during your working years”)
- Highlight what benefits continue past 65
- Offer alternatives or accommodations (e.g., increased life insurance, critical illness coverage, flexible benefits credits) that may be of value to older workers
2. Distinguish Between Different Benefit Types
Not all benefits can be treated the same way at age 65. The law is most permissive regarding long-term disability benefits, where the wage-replacement rationale is clear and coherent. The law is less permissive regarding other benefits like extended health coverage, dental, or life insurance, where wage replacement is not the primary purpose.
If your plan includes age-based provisions for benefits other than LTD, ensure that the rationale for those provisions is clearly documented and defensible. If you cannot articulate a sound business reason for an age-based reduction in, say, extended health coverage, the provision may be vulnerable to challenge.
3. Review Your Entire Benefits Architecture
Conduct a comprehensive review of your benefit plan to identify all age-based provisions. For each one, document:
- Why the age-based distinction exists (e.g., LTD wage-replacement rationale)
- When the provision was adopted
- Whether it remains aligned with current business needs and demographics
- Whether it complies with applicable employment standards and human rights law
If you find age-based provisions that lack clear rationale or that may not comply with law, consider revising them. This is particularly important if your workforce is aging and more employees are working past 65. If you are uncertain about the legal defensibility of your benefit provisions, consult an employment law advisor through our employers’ guide.
4. Offer Alternatives to Terminated Coverage
If your plan terminates LTD or other coverage at 65, consider offering alternatives:
- Extended health coverage or critical illness insurance that continues past 65
- Flexible benefits credits that employees can direct toward coverage of their choice
- Enhanced life insurance for older workers
- Wellness or preventive health benefits that may be valuable to aging employees
These alternatives may cost less than extending LTD coverage to age 70+, but provide meaningful protection and demonstrate commitment to supporting older workers.
5. Document Plan Provisions Carefully
Ensure that all benefit plan documents clearly set out:
- What benefits are provided at what ages
- How and when benefits change (e.g., “LTD coverage terminates on the first day of the month following the employee’s 65th birthday”)
- The rationale for any age-based provisions
- Any options or alternatives available to affected employees
Strategic Implications for Employees and Executives
Key Takeaway: Understand what benefits you have now and what will change at 65. Plan alternatives before that age arrives. If you’re in a senior or specialized role, negotiate benefits as part of your employment agreement.
1. Get a Clear Snapshot of Your Current Benefits
Do not assume you know what coverage you have at age 65. Request a formal summary from your HR department or benefits administrator that explicitly addresses:
- What coverage you have now
- What coverage will terminate at age 65
- What coverage will continue past 65
- Whether you have options to extend or convert coverage (e.g., converting group life insurance to individual coverage)
Do not assume that all your current coverage will continue. Request a written summary from your HR department or benefits administrator that specifically addresses benefits at age 65+.
2. Plan Alternative Income Protection Before Age 65
If your employer’s LTD plan terminates at 65, and you plan to work past 65, you should plan for alternative income protection:
Individual Disability Insurance: Before age 65, investigate obtaining individual disability insurance. This is far easier and less expensive to obtain before age 65; after 65, individual policies become difficult or impossible to get, and premiums are substantially higher. If you think you might work substantially past 65, obtain individual disability coverage before turning 65.
Savings and Investments: Build financial reserves (RRSP, TFSA, non-registered investments) that can serve as income replacement if you become unable to work. Employers often assume that by age 65, you have sufficient retirement savings; make sure this assumption is accurate for your circumstances.
Pension and Retirement Income: Understand what CPP, OAS, and workplace pension benefits you will have access to at 65. Model different scenarios: if you continue working to 70, what income will you have? If you become disabled at 68, what income replacement is available? These calculations inform your savings strategy. For senior executives and specialized roles, understanding how executive compensation and incentive plans (equity, bonuses, deferred income) interact with pension and benefits is critical to long-term planning.
3. Negotiate Benefits as Part of Employment Agreements
If you are hired at or near age 65, or if you are negotiating a renewal of your employment agreement, benefits should be part of the conversation:
- Ask explicitly what benefits will be available to you and for how long
- If standard coverage terminates at 65, negotiate alternatives: higher salary to compensate for lost LTD coverage, supplemental coverage, or flexible benefits credits
- Request that any age-based benefit changes be clearly documented in your employment agreement or a side letter
Many employers will negotiate on this point, particularly for senior or specialized roles. Your bargaining power may be greater than you realize. Review our employees’ guide for additional resources on negotiating employment terms.
4. Coordinate Your Retirement Planning with Benefits Changes
Benefits changes at 65 should factor into your broader retirement planning:
- If your LTD coverage terminates at 65, can you afford extended disability on retirement income alone?
- If extended health coverage terminates, do you have alternative health insurance or sufficient savings for out-of-pocket health costs?
- If life insurance is reduced, do you still have adequate coverage for your family’s needs?
Work with a financial advisor to model these scenarios and ensure your retirement plan is sound.
5. Request Written Confirmation of Your Benefits at Each Age Milestone
Do not rely on assumptions about what benefits continue. Each time you reach a milestone (age 60, 65, 70), request written confirmation from your employer or benefits administrator:
- A current benefits statement showing what coverage is active
- Confirmation of any changes that have occurred or will occur
- Notice of any plan amendments or changes in coverage
Having this documentation protects you and helps prevent surprises.
Frequently Asked Questions
Q: If I am working past age 65, will my employer’s LTD plan still cover me?
A: Almost certainly not. Most Ontario employer LTD plans terminate coverage at age 65. This is because LTD is designed as income replacement, and at 65, you typically have access to CPP, OAS, and possibly a workplace pension that serve that function. Before age 65, confirm whether your plan terminates at 65 and plan accordingly.
Q: Is it legal for an employer to eliminate my LTD coverage at age 65?
A: Yes. Ontario law permits employers to terminate LTD coverage at age 65 because LTD serves a wage-replacement function, and wage replacement is no longer needed once retirement income becomes available. This is not age discrimination in the traditional sense; it is a permissible age-based distinction tied to the function of the benefit.
Q: Can my employer terminate my extended health or dental coverage at age 65?
A: Possibly, but the legal analysis is different than for LTD. Extended health and dental are not wage replacement benefits, so the rationale for age 65 termination is weaker. If your employer terminates these benefits at 65, the employer should have a clear documented rationale and ensure compliance with human rights law. If you face loss of these benefits at 65, contact Pelsmakher Law to assess whether the change is legally defensible.
Q: Can my employer force me to retire at age 65?
A: No. Mandatory retirement at age 65 was eliminated in Ontario in 2005. An employer cannot compel you to retire or terminate you solely because you reach age 65. However, employees 65 or older can also be terminated, provided the employer provides advanced notice of pay in lieu of notice.
Q: Should I obtain individual disability insurance before age 65?
A: Yes, if you plan to work past 65 and want income protection in the event of disability. Individual disability insurance is much easier to obtain before age 65; after 65, it becomes difficult or impossible. If you are in good health, obtaining coverage before 65 locks in favorable premiums for life.
Q: What happens to my pension if I continue working past age 65?
A: This depends on your pension plan. Some defined-benefit plans stop accruing pension credits at age 65; others continue accrual to age 70 or beyond. Some defined-contribution plans (Group RRSP, Group TFSA) continue contributions past 65 unless the plan document specifies otherwise. Review your pension plan summary to understand how your specific plan treats post-65 service.
Q: Can I work longer to earn more pension credits?
A: Possibly. If your pension plan permits continued accrual past age 65, working longer increases your pension entitlement. However, there are also tax-sheltering limits (contribution room limits for RRSPs) and income tax considerations. Consult with a tax professional or pension advisor to understand the financial impact of working longer.
Q: What income is available to me if I become disabled after age 65?
A: If your employer’s LTD plan terminates at 65, employer-sponsored income replacement will not be available. You would rely on: (1) CPP disability benefits (if you qualify); (2) OAS benefits at age 65+ (if eligible); (3) workplace pension benefits (if you have vested pension rights); (4) personal savings or investments; (5) individual disability insurance (if you obtained coverage before 65); and (6) provincial or federal income assistance (if you qualify). Plan ahead to understand what income you would have if you became unable to work after 65.
Q: When should I start receiving CPP and OAS?
A: This is a major financial planning decision that depends on your health, family history, other income sources, and life expectancy. CPP can be taken as early as age 60 (at reduced benefit) or delayed until age 70 (at increased benefit). OAS begins at age 65 but can be delayed until age 70 for an enhanced benefit. Consult a financial advisor or use online calculators to model your options. Taking benefits earlier means lower monthly payments for life; delaying means higher monthly payments for fewer years.
Q: What is the difference between CPP, OAS, and my workplace pension?
A: CPP (Canada Pension Plan) is a federal program that provides retirement income based on your contributions during your working years. OAS (Old Age Security) is a federal program that provides a modest retirement benefit to Canadian residents age 65+, subject to income limits. Workplace Pension is a benefit provided by your employer, either defined-benefit (employer guarantees a monthly pension amount based on salary and service) or defined-contribution (employer contributes to an account, but the benefit depends on investment returns). All three are typically available at age 65, but they operate on different principles.
Understanding pension and benefits structures, particularly how they change as you age, requires knowledge of employment law, tax law, pension regulation, and human rights law. For employers, designing benefits that are both sustainable and compliant with legal requirements demands careful analysis. For employees and executives, planning for benefits transitions and understanding your entitlements helps you make informed decisions about continuing to work, retirement timing, and financial security.
Pelsmakher Law advises both employers on benefits design, compliance, and communication, and employees and executives on understanding entitlements, negotiating benefits as part of employment agreements, and planning for retirement and benefits transitions.
For employers seeking guidance on benefits design and compliance, contact Pelsmakher Law for a confidential consultation. Additional resources are available on our employers’ guide.
For employees and executives planning for retirement, benefits transitions, and compensation negotiations as you approach or work past age 65, review our employees’ guide or return to the blog for more guidance on Ontario employment and benefits law.
