January 1 to December 31, 2022
In accordance with the NJC By-Laws, the undersigned submit this annual report regarding the performance and the administration of the Disability Insurance Plan during the period of January 1 to December 31, 2022.
Chairperson of the Board of Management
Patti Bordeleau
Employer Side Members
Irene Arkorful, Treasury Board of Canada Secretariat
Dr. Bryan Garber, Department of National Defence
Nathalie Leblanc, Agriculture and Agri-Food Canada
Michel Alarie, Innovation, Science and Economic Development Canada
Bargaining Agent Side Members
Colby Briggs, Professional Institute of the Public Service of Canada
James Infantino, Public Service Alliance of Canada
Stéphanie Rochon-Perras, Association of Canadian Financial Officers
June Winger, Union of National Defence Employees
General Statement
The Disability Insurance Plan Board of Management (the “Board”) is pleased to provide this report on the administration of the Public Service Disability Insurance Plan (the “DI Plan” or “the Plan”), its financial performance and the activities of the Board for the period of January 1 to December 31, 2022.
Plan Overview
The DI Plan provides income replacement for Plan members during periods of long-term disability equal to 70% of insured earnings. Employees who meet the criteria of total disability preventing performance of the duties of their regular employment become eligible for long-term disability insurance benefits at the expiration of the longer of paid sick leave or the 13-week elimination period for the DI Plan. Employees receive income replacement payments as well as disability case management and rehabilitation services from Sun Life Financial (the Insurer). These payments are offset by payments to which employees may be eligible from other disability benefit programs.
The DI Plan is a group insurance policy underwritten and administered by Sun Life Assurance Company of Canada.
Administration
The total benefits paid out by the Plan during the 2022 year amounted to $421.8 million, compared to $380.8 million in 2021. As of the end of 2022, the DI Plan had 12,512 members utilizing benefits (claims in payment at year-end 2022) and had $3.298 billion in claims reserves. The average number of Plan members during 2022 was 290,000 (up from 272,000 members in 2021).
The disability incidence rate was higher than the previous year at 11.0% in 2022 compared to 10.4% approved claims per thousand Plan members in 2021. The rate of termination of active claims (approved claims in payment) increased from 2.28 terminated claims per 10 claims in payment in 2021 to 2.32 terminated claims in 2022.
The overall result of the 2022 financial experience for the Plan at year end was positive, with an in-year gain of $96.3 million. As of December 31, 2022, the balances in the Claims Fluctuation Reserve and the Surplus Account were $162.8 million and $430.5 million respectively for a total Plan surplus of $593.2 million. This is an increase over the $496.9 million total Plan surplus as of December 31, 2021. The Plan is on a sound financial footing at the end of 2022. The Board, in its role of overseeing the financial management of the Plan, will continue as always to monitor the trends in plan experience in the coming year.
In addition to overseeing the financial results of the Plan, the Board continued to work actively with the Insurer and the Plan Sponsor (Treasury Board Secretariat) to strengthen and improve the effectiveness of the administration of the Plan. Some of the key activities in this area are outlined below.
At its May meeting, the Board was briefed by the Insurer on the results of the annual Claimant Survey conducted in 2021. The results are based on the updated research methodology which provides a true account of the entire claims experience. The results reported on the experience of recovered members (change of definition, return to work, and not disabled). The survey was sent on a monthly basis extending from submission of a claim until its closure, from January to December 2021. Objectives included assessing claimants’ satisfaction with their disability claim experience and identifying areas of improvement.
The survey results were compared to those of the previous year, as well as other benchmark groups, representing results from other large clients of the Insurer. The DI Plan Disability Client Index score, which is an overall measure of the disability claim experience that considers the ability to make the claim process easy, the ability to proactively reach out during the claim process and the ability to effectively handle any issues during the claim process, declined by 4 points from 2020 and performed slightly below the results of other Sun Life benchmark groups. In 2021, the DI Plan Claimant Survey results had a lower proportion of respondents who returned to work compared to the broader Sun Life benchmark groups. It was highlighted that DI Plan Claimants have positive perceptions of Sun Life case managers, and that case manager conduct and communication are rated strongly. It was noted that claim resolution continues to have a strong impact on perceptions of Sun Life, as claimants who returned to work view their experience much more positively than those whose claim was ended. Like the results from the 2020 Survey, the high number of case manager-related improvement and positive comments demonstrate the significant role case managers play during the disability claim. Opportunities for improvement included making the claim process easier, educating the claimant on the claim process, and more clearly explaining how the payment is calculated. The Insurer will continue to conduct this survey in the years to come and will continue to provide year-to-year comparisons.
Activities
The Board began 2022 with more appeals than in previous years, and successfully reviewed more than in previous years; however, with case volume returning to pre-pandemic levels, the Board has many outstanding appeals to be heard. Ongoing improvements to file presentation remain a collaborative effort between the Board and the Insurer.
The Board continued to meet in a hybrid format. This, coupled with the use of the electronic file sharing service which allowed Board members to instantaneously retrieve confidential protected documents in a secure setting, enabled the Board to continue its work.
The Board created a sub-committee to review and propose modernizations to its Terms of Reference and the Plan and provide these recommendations to the Executive Committee for approval. In 2022, the sub-committee finalized the English Terms of Reference and intends to complete the French version and the review of the Plan in 2023.
The Board continued to receive updates from the Insurer on several topics. These included the 2022 Action Plan, their new service provider Claim Lab, treatment of long duration claims, a reserve basis update for 2021, and the overview of the lifecycle of a claim.
Financial and Administrative Oversight
At its annual Sun Life Headquarters’ meeting, the Board received various presentations. These included the Disability Manager Training Program, Group Disability and their programs, subrogation, retroactive claims adjustment, the appeal process, the disability online tool.
The Board held two financial update meetings, one in June 2022 where the Insurer provided an overview of the full year financial results for 2021 as well as the 2022 year-to-date experience with updates on the status of the Plan, and another in December 2022 on the 2022 Plan experience. Highlights of years 2018 to 2022 are presented in the chart below.
It was reported that the overall financial experience of the Plan in 2022 was positive, with an in-year gain of $96.3 million. Of that amount, the interest on the Plan surplus total at the beginning of the year contributed $13.4 million in revenue. The net in-year Plan experience (without the surplus) was a gain of $82.9 million. Therefore, the premium level alone, without the interest of $13.4 million generated from surplus was sufficient to support the costs incurred by the claims in 2022. This contrasts with the previous year (2021) where the premium level, without the interest from the Surplus, was not sufficient to support the costs incurred by the claims that year.
Summary of Annual Financial Results
|
Year |
Premium Income |
Interest Income |
Paid Claims* |
Total Plan Expenditures* |
In-year gain/loss |
|---|---|---|---|---|---|
|
2018 |
405.0 |
91.0 |
352.7 |
600.6 |
(104.6) |
|
2019 |
430.2 |
90.4 |
385.5 |
660.1 |
(139.5) |
|
2020 |
838.6** |
91.4 |
391.3 |
522.0 |
408.0 |
|
2021 |
597.9 |
94.9 |
380.8 |
680.9 |
11.9 |
|
2022 |
651.0 |
99.1 |
421.8 |
653.8 |
96.3 |
* Total plan expenditures are calculated as paid claims, expenses and premium taxes, as well as the change in the claims reserves held at the beginning of the year as compared to the end of the year. (Note: The paid claims amount column is included in the total Plan expenditures column. The In-year Gain/Loss equals the Premium and Interest Income minus the Total Plan Expenditures.)
** The 2020 Premium Income is composed of “Regular premiums” totalling $524.8M and two lump sum deposits totalling $313.7M.
The Board has reviewed the monthly and annual reports received from the Insurer and it has found that the current format continues to serve its needs and purposes.
Claims Experience
The 2022 annual report prepared by the Insurer includes a broad overview of Plan claims data. During the 2022 calendar year, there were 4,365 notified claims, an increase of 459 or 11.8%; and 3,189 claims approved, an increase of 373 or 13.2%. The number of claims declined during the year increased by 501 or 60.4% and the number of claims terminated (closed) during the year increased by 138 or 5.0%. The decline and approval rates are something that the Board will continue to monitor with the Plan insurer.
Claims Statistics
| 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|
|
Number of claims notified during the year |
|
4,020 |
3,421 |
3,906 |
4,365 |
|
Number of claims approved during the year |
2,972 |
3,211 |
2,575 |
2,816 |
3,189 |
|
Number of declined claims during the year |
787 |
869 |
1,046 |
830 |
1,331 |
|
Number of terminated (closed) claims during the year |
2,573 |
2,558 |
2,900 |
2,759 |
2,897 |
|
Total number of approved claims at year-end |
11,862 |
12,470 |
12,149 |
12,188 |
12,512 |
|
Total number of pending claims at year-end |
525 |
480 |
311 |
498 |
451 |
Distribution (%) of Claims Approved in 2022 by Causes of Disability
Total for Year 2022
|
Cause of Disability |
Per Cent |
|---|---|
|
Accidents |
5.3 |
|
Arthritis-Rheumatism |
3.6 |
|
Cardiovascular |
2.0 |
|
Gastro |
1.5 |
|
Mental Health Conditions |
60.9 |
|
Neoplastics (Cancer) |
10.0 |
|
Neurological |
4.6 |
|
Spine / Sacro-Iliac |
4.4 |
|
Other |
7.7 |
Mental health conditions remain the leading cause of new disability claims approved in 2022. This continues to be the experience across other Canadian disability plans. The distribution of causes of disability for all new claims approved in 2022 is shown in the chart above. As noted, the most frequent cause of new approved claims was mental health conditions (60.9% of the total), an increase from 2021. The actual number of newly approved claims for this cause of disability increased from 1,623 in 2021 to 1,941 in 2022 in line with the overall volume of claims which also increased in 2022.
The second largest cause of new disability claims was neoplastics (cancer), at 10.0% with other categories remaining somewhat similar to the previous year.
Plan Governance
The Board of Management continues to focus on good governance in its responsibilities to oversee the administration of the DI Plan. Over the course of 2022, the Board has been very engaged with the Insurer on topics and issues of interest. In the coming year, this mutually beneficial and helpful engagement will continue to be welcomed by both the Board and the Insurer.
Appeal Cases
The Board’s terms of reference include the duty to examine appeals against claims declined by the Insurer, making recommendations to the Insurer on these and in certain circumstances providing advice to the Employer on practices related to disability management in departments and agencies.
The Board reviewed a total of 17 new appeal cases in 2022. The Board found no reason to disagree with the Insurer’s decision to deny benefits in 13 appeals, disagreed with the Insurer’s decision in three appeals, and deferred a decision on one appeal, pending further information from the Insurer.
Training
Due to the lifting of travel restrictions resulting from the COVID-19 global pandemic, various Board members were able to attend two conferences in 2022: the Canadian Public Sector Pension and Benefits Conference and the 55th Annual Canadian Benefits Conference. The Board looks forward to continuing to participate in conferences and learning sessions held by the International Foundation of Employee Benefit Plans (IFEBP) as a means to develop Board member expertise and to stay current with trends.
Board Membership
The Board met eight (8) times during the period covered by this report, devoting much of its time to hearing appeal cases and overseeing the administration and financial experience of the DI Plan.
The Board welcomed a new Bargaining Agent Side member, Colby Briggs from the Professional Institute of the Public Service of Canada, and welcomed a new Employer Side member, Michel Alarie from Innovation, Science and Economic Development Canada.
The Board thanked Bargaining Agent Side member, Samtou Tchamdja from the Professional Institute of the Public Service of Canada, for their dedication to the Board, as they stepped down from the Board.
The members of the Board at the end of the 2022 reporting period were:
- Patti Bordeleau, Chairperson;
- Michel Alarie, Innovation, Science and Economic Development Canada;
- Irene Arkorful, Treasury Board Secretariat;
- Bryan Garber, Department of National Defence;
- James Infantino, Public Service Alliance of Canada;
- Nathalie Leblanc, Agriculture and Agri-Food Canada;
- Stéphanie Rochon Perras, Association of Canadian Financial Officers;
- Colby Briggs, Professional Institute of the Public Service of Canada; and
- June Winger, Union of National Defence Employees
In 2021, TBS introduced an Observer Program, whereby diverse senior-level public servants may be selected to participate on pension and benefits boards to develop their knowledge and experience to become future appointed Employer representatives. As a result, two Employer Side observers began attending meetings for a one-year term which concluded in August 2022. The Board also provided the opportunity to the Bargaining Agent Side to nominate two observers per meeting for the same purposes. It is expected the Observer Program will continue in the next year.
Conclusion
The Board would again like to thank Dr. Raymond Aubin for providing expert medical advice during the review of appeals.
Finally, the Board would also like to express its appreciation to the Insurer for its commitment and collaboration in working with the Board. A number of constructive initiatives were undertaken over the year in the interest of supporting and communicating with Plan members and providing the Board with the knowledge and information it needed to fulfil its duties.