Summary

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.

Background:

Perhaps the change that will have the greatest all encompassing impact on the IRB quantification is the change from 80% of net weekly income under the Old SABS, to 70% of gross weekly income under the New SABS.

While this change removes the obligation for insurers to determine the deduction amount for income taxes, Canada Pension Plan contributions, and Employment Insurance premiums for any given income level, the practical impact of this on insurers is negligible, as calculators prepared by accounting firms are rampant throughout the industry.

However, the impact of this change on the IRB quantum can be significant, exceeding a 10% difference between the two calculations under certain situations.

Depending on the insured’s income level and applicable tax credits, the impact of the change will vary.  The charts below illustrate the resulting IRB for single and married individuals at different income levels.  The highlighted income level shows whether the Old and New SABS intersect at 2010 tax rates.

As illustrated in the charts, single people will be better off under the new system when their gross weekly income is lower than $330, and married people (assuming the spouse has no income), will be better off when gross weekly income exceeds $540.

Based on the New SABS, the policy limit of $400.00 per week is reached for both single and married individuals when their gross weekly income exceeds $572 per week.

If you would like a printout of all income levels, please contact us at answers@adsforensics.com.