January 1 to December 31, 2020

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, 2020.

Chairperson

Barry Fennessy

Employer Side Members

Dr. Bryan Garber, Department of National Defence
Natalie Julien, Canadian Food Inspection Agency
Nathalie Leblanc, Parks Canada
Catherine Monette, Treasury Board Secretariat

Bargaining Agent Side Members

James Infantino, Public Service Alliance of Canada
Stéphanie Rochon-Perras, Association of Canadian Financial Officers
John Staric, Professional Institute of the Public Service of Canada
June Winger, Union of National Defence Employees

_______________________________________________

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”), its financial performance and the activities of the Board for the period of January 1 to December 31, 2020.

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 that employees may be eligible for from other disability benefit programs.

The DI Plan is a group insurance policy underwritten and administered by Sun Life Assurance Company of Canada.

Report

As of the end of 2020, the DI Plan had $2.842 billion in claims reserves, 255,000 Plan members (up from 248,000 members at the end of 2019), and 12,149 members utilizing benefits (claims in payments at year-end 2020). Total benefits paid out by the Plan during the 2020 year amounted to $391.3M, compared to $385.5M in 2019.

The disability incidence rate was significantly lower than the previous year at 10.1 in 2020 compared to 12.9 approved claims per thousand Plan members. The rate of termination of active claims (approved claims in payment) increased from 2.14 terminated claims per 10 claims in payment in 2019 to 2.35 terminated claims in 2020.

The overall result of the 2020 financial experience for the Plan at year end was positive, with an in-year gain of $408M. At December 31, 2020, the balances in the Claims Fluctuation Reserve (CFR) and the Surplus Account were $131.2M and $353.8M respectively for a total Plan Surplus of $485M. This is in contrast to a $77M total Plan Surplus at December 31, 2019. This was due to the lump sum injection of funds from the Government of Canada in Q1 2020 into the Plan in addition to implementing the 20% Premium Rate increase. This positioned the Plan on a sounder financial footing during 2020. The Board, in its role of overseeing the sound financial management of the Plan, will continue as always to monitor the trends in plan experience in the coming year.

In addition to its accountability to oversee the financial results of the Plan, the Board continued during the year 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.

The Board began 2020 with a manageable level of appeals and while appeals continued to be referred, the Board successfully reviewed them in a timely manner. Through the dedication and commitment of all stakeholders, the Board remains on schedule. Ongoing improvements to file presentation remain a collaborative effort between the Board and the Insurer. In accordance with the Board’s recommendations, the Insurer adapted the content of files to include references to medical guidelines and supplementary details supporting the rationale for its decisions.

Despite the challenges in holding in-person meetings as a result of the COVID-19 pandemic, the Board was able to pivot its method for holding meetings and took advantage of the videoconferencing technology to hold virtual meetings. This, coupled with the use of a file sharing service that allowed Board members to instantaneously submit and retrieve confidential protected documents in a secure setting, enabled the Board to continue its work.

At its June meeting, the Board was briefed by the Insurer on the results of the annual claimant survey conducted during 2020. The results are based on the updated research methodology which provides a true account of the entire claims experience. The survey was sent to recovered members (change of definition, return to work, and not disabled) on a monthly basis extending from submission of a claim until its closure, from January to December 2020. Objectives included assessing claimants’ satisfaction with their disability claim experience and identifying areas of improvement. In terms of measuring overall satisfaction, the new methodology incorporates a scale from 1-5 on three components and results appear as percentages relating to the number of responses with a score of 4 or 5 out of 5 indicating satisfaction.

The survey results were compared to 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 which considers the ability to make the disability claim process easy, the ability to proactively reach out during the disability claim process and the ability to effectively handle any issues during the disability claim process, improved by four points versus 2019 and remains relatively on par with the experience reported by other claimants of the Insurer. Results indicated that, similar to the results from the 2019 survey, the high number of case manager-related improvement and positive comments demonstrated the significant role case managers play during the disability claim. The survey further indicated that the DI Plan claimants had positive perceptions of the case managers. Case manager conduct and communication were rated strongly, and many claimants cited case manager conduct as an area the Insurer performed well during the claim. Claim resolution continued to have a strong impact on perceptions of the Insurer, as claimants who returned to work viewed their experience much more positively than those whose claim was ended. 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.

The Board continued to receive updates from the Insurer on several topics. These included the Insurer’s decision-making process in adjudicating claims, disabilities due to addictions and substance abuse, as well as updates regarding retroactive adjustment of benefits as a result of new collective agreements.

Board Membership

The Board met six (6) 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 Employer Side member, Dr. Bryan Garber from Canadian Forces Health Services, Department of National Defence.

The members of the Board at the end of the 2020 reporting period were:

Financial and Administrative Oversight

The Board held its annual meeting in June 2020 with the Plan insurer to review the year-end financial results for 2019 and to receive updates on the status of the Plan, and the results for 2020 were presented to the Board at the June 2021 meeting. Highlights are presented in the following chart.

The Board reviewed the premium rating analysis at its November meeting. This timing allows for factoring into the analysis the Insurer’s fall update of the Reserves Basis and for considering more substantial current year plan experience. In addition, this approach supports timely implementation of the premium rate adjustment recommendation and the lump sum injection of funds from the Government of Canada. The Insurer noted that the premium rate increase and the lump sum injection have replenished the Plan Surplus back to the target level. Though the current Plan financial experience in 2020 was unexpected, as claims volume was atypical and much lower than normal and expected, the Plan will continue to be monitored and any future financial measures determined as required according to the funding guidelines.

Summary of Annual Financial Results

Year

Premium Income
($ Million)

Interest Income
($ Million)

Paid Claims*
($ Million)

Total Plan Expenditures*
($ Million)

In-year gain/loss
($ Million)

2017

369.2   

93.1

328.5

451.0

11.3

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

* 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.)

** Regular premiums totalled $524.8M; lump sum deposits totalled $313.7M

Claims Experience

The 2020 annual report prepared by the Plan insurer includes a broad overview of Plan claims data. During the 2020 calendar year, there were 3,421 notified claims, a decrease of 599 or 15%; and 2,575 claims approved, a decrease of 636 or 20%. The number of claims declined during the year increased by 177 or 20.4% and the number of claims terminated (closed) during the year increased by 342 or 13.4%. The decline and approval rates are something that the Board will continue to monitor with the Plan insurer.

Claims Statistics

  2017 2018 2019 2020

Number of claims notified during the year


 3,787


 3,861


 4,020

 3,421

Number of claims approved during the year


 2,717

 2,972

 3,211

 2,575

Number of declined claims during the year


 1,005

    787

   869

 1,046

Number of terminated (closed) claims during the year


 2,563

 2,573

 2,558

 2,900

Total number of approved claims at year-end


11,465

11,862

12,470

12,149

Total number of pending claims at year-end


    469

    525

    480

    311


Distribution (%) of Claims Approved in 2020 by Causes of Disability
(total for year 2020)

Cause of Disability

Per Cent

Accidents

  8.0

Arthritis-Rheumatism

  4.6

Cardiovascular

  2.5

Gastro

  2.1

Mental Health Conditions

55.1

Neoplastics (Cancer)

11.5

Neurological

  5.8

Spine / Sacro-Iliac

  5.3

Other

  5.1

 

Mental health conditions remain the leading cause of new disability claims approved in 2020. This continues to be the experience across other Canadian disability plans.

The distribution of causes of disability for all new claims approved in 2020 is shown in the chart above. As noted, the most frequent cause of new approved claims was mental health conditions (55.1% of the total), a slight increase from 2019. The actual number of newly approved claims for this cause of disability decreased from 1,748 in 2019 to 1,419 in 2020 in line with the overall volume of claims which also decreased in 2020.

The second largest cause of new disability claims was neoplastics (cancer), at 11.5% with other categories remaining similar to the previous year.

Appeal Cases

The Board’s terms of reference include the duty to examine appeals against claims declined by the Plan insurer, making recommendations to the Plan 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 12 new appeal cases in 2020. The Board disagreed with the Insurer’s decision to deny benefits in one of those cases and found no reason to disagree with the Insurer in 11 cases.

Board Member Training

Due to the travel restrictions resulting from the COVID-19 global pandemic, the Board did not participate in any events held by the International Foundation of Employee Benefit Plans (IFEBP) in 2020. As the social distancing and travel restrictions are lifted, the Board looks forward to resuming building their expertise and staying abreast of current information and trends in the disability field by participating in conferences and learning sessions.

Financial Reporting

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.

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 2020, 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.

Workplan For 2021

In the coming year, the Board plans to address the following key areas through a variety of activities:

  1. Monitor and advise on DI Plan operations including the on-going streamlining of the claim process and communications to claimants;
  2. Review financial results and experience in light of the premium rate increase implemented and the lump-sum fund injection in 2020 to ensure the Plan is appropriately funded going forward;
  3. Monitor trends in claims processing and engage with the Plan Administrator on issues of concern to the Board;
  4. Review appeal processes to ensure timeliness of hearing appeals cases;
  5. Provide learning and development opportunities to Board members;
  6. Provide feedback, based on appeal case reviews, to TBS and other stakeholders on opportunities for improvement for enabling employees to return to work following absences due to disability; and
  7. Review the results of the new Plan member survey with a view to improving services for Plan members.

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.