In a recent LAT decision, the adjudicator determined “An Employer’s Confirmation Form is information reasonably required to assist within the meaning of s. 33(1)” of the SABS (17-005692 v Aviva Insurance Company of Canada).
But can the form really stand alone as the basis of an Income Replacement Benefit (IRB) calculation? We suggest that in most cases, it cannot. Although there are exceptions.
The OCF-2
An Employer’s Confirmation Form (OCF-2) provides information from which to complete an IRB calculation. It confirms the insured’s work history as completed by the employer, provides employment dates, basic income details, and information on the potential availability of other income replacement assistance.
While a good starting point for an IRB calculation, the form itself contains a number of deficiencies, has not materially changed since 2004, and is clearly misunderstood too often by employers.
So what should you be looking for when relying on this form?
Deficiencies with the Form
All of the information requested on the OCF-2 is relevant in the calculation of an IRB. Which means that any missing or inaccurate information on the form, can directly impact the IRB payable.
While basic wages are obviously required, a common deficiency is the exclusion of vacation or bonus payments, or at least a prorated portion of them, in the four weeks prior to the accident. This can lead to materially understated IRB calculations. The largest impact is often seen in situations where a claimant also has other income replacement assistance available to them, and a top-up would be available if this additional income was considered.
For details on how vacation, bonuses and other irregular remuneration should be considered, and further highlighting the impact of the OCF-2 in regard to these items, we suggest our post – Bonuses and Commissions – Calculating Gross Income for IRBs
In addition, gross employment income is defined in the SABS to include “other remuneration from employment”.
In addition to the above, in Pafco and Howden (FSCO Appeal P00-00028), employer’s contributions towards life insurance premiums, weekly indemnity insurance premiums, a Pension Plan, pay equity adjustment, and even uniform allowance where considered to be income for IRB purposes.
While the form does request details of Other Monetary Compensation, it has been our experience that employers will rarely provide details of the vacation and bonus items outlined above, and have never provided details of employer’s contributions on non-taxable benefits.
So while an OCF-2 may be a starting point, it rarely provides a complete picture. But missing information isn’t all you have to be aware of.
User Error
With all other deficiencies ignored, we are still left with the biggest potential issue with the use of the OCF-2…user error.
This will primarily be as a result of a few key issues: a lack of knowledge on the part of the person being asked to complete the OCF-2; misinterpretation; and/or data entry errors.
As it relates to a lack of knowledge and misinterpretation, specifically of the legislation and how the data is being used, we find the following to be common mistakes:
- An employer providing net rather than gross income. Pay statements will usually show both, the pre (gross) and post-deduction (net) pay. It is common that an employer incorrectly interprets the OCF-2 as requesting the amount received by the insured (i.e. the cheque amount, representing after deductions), as opposed to the amount earned by the insured. This discrepancy can significantly understate the IRB payable.
- Providing incorrect employment dates. We commonly see these errors in all date fields, including the employment from and to dates, last date worked, and the date of return. The concern with these errors is how the insurer uses this information in the absence of any other detail, whether in allocating income or calculating if the claimant worked 26 of the 52-weeks prior to the accident.
- Providing details for pay periods rather than the four specific pre-accident weeks. For example, if the claimant is paid bi-weekly, the employer will provide eight weeks of earnings rather than four. The obvious result is a significantly overstated pre-accident income and resulting IRB payable.
- Providing details for the incorrect four weeks. We commonly see this as either the four weeks prior to when the claimant ceased working (pre or post-accident), the four weeks prior to when the form was completed, or sometimes the four weeks prior to what appears to be a completely arbitrary date. The impact to the calculation in these situations will vary on a case-by-case basis.
All of these we see on a regular basis, and all of them have the capability to significantly impact the IRB payable, both positively and negatively.
Insurer Error
After all the errors outlined above are addressed, the error which we see most commonly is selecting the wrong pre-accident period. While the OCF-2 may indicate the highest average weekly income in either the four or 52-weeks prior to the accident, if the adjuster selects the incorrect one, the IRB payable can be materially impacted.
Whether this is the fault of data entry errors into the calculators adjusters use or possibly just the entry of incomplete data, we aren`t sure. But it is common enough that you need to keep your eyes on this issue.
There is a solution
We highly recommend you review pay stubs, especially if they include year to date amounts, and the prior tax return. While we would suggest these aren’t a required document for claimants to support their claims, they can be beneficial to ensure no income was missed.
And if you would like to learn more about our employer forms to supplement the OCF-2, and provide you with the additional information you need to be comfortable the calculation is reasonably accurate, don’t hesitate to contact us at answers@adsforensics.com.
And as always, we are available to talk at 1-800-380-7908 ext. ASK (275).