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.
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.
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
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.
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.
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%.
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
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.
Summary: The New SABS (O. Reg. 34/10) have introduced changes which will require continued efforts on the part of an adjuster to confirm what benefits may be considered payments for loss of income, and subsequently, what will be deductible as other income replacement assistance.
Payments for loss of income which are deductible from an IRB are outlined in paragraph 3(7)(d) of the New SABS. This paragraph is a change from the Old SABS subsection 2(9), apparently codifying previous FSCO arbitrations decisions, such as Sharma-Singh and Co-operators General (A07-000588).
For details on other income replacement assistance, we refer you to our ADS Blog.
So what changes did the New SABS bring?
Insurance Contract – The first change deals with contracts under which periodic payments of insurance are deemed to be payments for loss of income. Specifically, payments are now deemed to be payments for loss of income “irrespective of whether the contract for the insurance provides”:
Summary: The Insured received collateral benefits which were deemed to be of a non-indemnity nature, and as such, not payments for loss of income under an income continuation benefit plan. On this basis, they are not deductible from an Income Replacement Benefit (IRB).
This decision relates to accidents which occurred from November 1996 to September 2010.=
Roana Codling-Mokoena and CAA Insurance Company, FSCO A04 B000017, October 17, 2006 – Arbitrator Leitch
Date of MVA – September 20, 2000.
The insurer disputed payment of IRBs, arguing the IRBs should be reduced by the insured’s receipt of benefits under a disability insurance policy she purchased prior to the accident from Crown Life.
Under the New SABS (O. Reg. 34/10), single people will see their Income Replacement Benefit (IRB) rise when compared to the Old SABS (O. Reg. 403/96) if their gross weekly income is lower than $330, and married people (assuming the spouse has no income) will see their IRB rise when their gross weekly income exceeds $540.
It appears the New SABS (O. Reg. 34/10 – from Sept 1, 2010 to current) have been drafted to bring greater clarity to the methodology of calculating the IRB, based, in part, on conclusions in arbitration decisions at the Financial Services Commission of Ontario (FSCO).
The ordering of the component parts to calculate the IRB appears to be unambiguous and is performed in the following steps (for the first 104-weeks of disability if the individual was less than 65 at the date of entitlement):