Monthly Archives: February 2015

Common Errors and Deficiencies with the OCF-2

An Employer’s Confirmation Form (OCF-2) is, as the name states, filled out by the employer to confirm the insured’s work history. It provides employment dates, basic income details, and information on the potential availability of other income replacement assistance (collaterals). All of this information would be used in the calculation of the Income Replacement Benefit (IRB).

It is, however, grossly deficient in outlining the information required from an employer in light of arbitration decisions over the years. Part of this is likely due to the OCF-2 having not been updated since 2004.

Deficiencies with the Form

Right off the bat, we can see this form presents a few issues as it pertains to relying on this information to calculate an IRB.

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How You Can Get More Out of the Employer’s Confirmation Form (OCF-2)

As we mentioned in our blog post on common errors and deficiencies found in the OCF-2 form, there are ways to make the form work better for you.

By requesting not only the correct supporting documentation, but asking the right questions, as well, you can ensure a correct Income Replacement Benefit (IRB) calculation every time.

Supporting documents

Let’s start with the documentation. Why are these so important?

As noted in our previous blog post, the people completing the OCF-2, don’t always have the requisite knowledge to correctly and completely provide answers to the questions they are asked. As such, supporting documentation helps to support the amounts noted on the OCF-2, and ensure it has been completed correctly. Continue reading

How are loans considered in an Income Replacement Benefit (IRB) calculation?

Generally, loans received by an insured, regardless of the source, are not considered income for IRB purposes. But, as with most situations, and because this would be a really short topic otherwise, it’s not quite so cut and dry.

Traditionally, this issue is more prevalent after an accident than before, but the same principles apply. Whether it is a self-employed individual who cannot work post-accident and is taking loans from their business to survive, or an employee who is receiving loans from his employer, family, or friends, you need to understand whether the receipt of money is related to employment or self-employment activities.

Background:

Subsection 4(1) of the SABS defines gross employment income as “salary, wages and other remuneration from employment…”

Subsection 3(1) of the SABS defines self-employment as a “trade, occupation, profession or other type of business…” It would appear then that income from self-employment would be as a result of providing services as a business to customers in return for money or other payment type.

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When and how is interest payable on overdue benefits?

Summary

The interest rate on overdue benefits is now payable at a rate of 1% per month, compounded monthly, for accidents on or after Sept. 1, 2010.

Any accidents prior to Sept. 1, 2010, are still payable at the rate of 2% per month, compounded monthly.

What does this mean?

The current low interest rate environment might have helped insurers, as the New SABS (Ont. Reg. 34/10) dropped the interest rate on overdue payments from 2% to 1%.

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Is Interest Income Considered when Calculating an Income Replacement Benefit?

There are a number of ways that someone might earn interest income, be it on an investment, or as a result of late payment from a client. As with any income, interest must be reported for taxes. But, whether interest is included in the calculation of an income replacement benefit (IRB), is entirely dependent on whether the income was earned as a result of employment activities.

For the difference between employed and self-employed, please see our blog post on employment status.

Background

Subsection 4 (1) of the Statutory Accident Benefits Schedule (SABS), defines gross employment income as “salary, wages, and other remuneration from employment.” We note, of significance, is the connection between the income and employment.

For employed individuals, excluding self-employed, there are limited situations in which interest income is received as a result of their employment.  Continue reading

The Role Employment Insurance Benefits Play in Calculating an IRB

Employment Insurance (EI) benefits are explicitly included as a component of gross employment income per the Statutory Accident Benefits Schedule (SABS). Subsection 4(1) defines Gross Employment Income as “salary, wages and other remuneration from employment, including fees and other remuneration for holding office, and any benefits received under the Employment Insurance Act (Canada)…”

So, why the need for a blog post?

EI benefits can be more than just a component of an individual’s pre-accident income, they can also be the basis of their eligibility for an Income Replacement Benefit (IRB).

The Many Roles of EI Benefits

Eligibility is the first question that must be addressed when starting to calculate an IRB. EI benefits are important in determining an insured’s eligibility if they are unemployed at the time of the motor vehicle accident. If an insured is receiving EI benefits at the time of the accident, they qualify for an IRB, as per s. 5(1)1.ii of the SABS. Continue reading

Employment Expenses Must be Considered when Calculating an Income Replacement Benefit

There are many factors that can affect income for an insured. Employment expenses are one piece of this puzzle.

If an employee, in the course of employment, is required to pay certain expenses as a means to earn income, they could have employment expenses. These expenses may be reported on a person’s income tax return, although the allowable amount of expenses will vary depending on how the individual earns income.

These employment expenses are different from business expenses which would be claimed by someone who is self-employed.

For more information on employment status, head over to our blog on that very topic. To learn more about the difference between employed and self-employed, we’ve handily covered that topic in another blog post.

What bearing do these expenses have on an Income Replacement Benefit (IRB)?

Expenses an employee incurs in performing their job, and which are deductible for tax purposes pursuant to the Income Tax Act, would also be deducted in the calculation of an insured’s income for IRBs.

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