Summary: A new term for what was previously called collateral payments for loss of income under the prior legislation, OIRA appears to bring together s.7(1) and (2) of the Old SABS. The only significant change appears to be the addition of “gross”…but does that have an impact?
An Introduction:
The New SABS (O. Reg. 34/10) introduces us to “Other Income Replacement Assistance” (s 4(1)). Commonly referred to as collateral benefits, the new definition highlights that OIRA:
- Relates to the current accident
- Is the amount of any gross weekly payment for loss of income that is being received, or that may be available to the person but is not being received as an application has not been made.
- The following are excluded benefits: the Employment Insurance Act (Canada), payments under a sick leave plan that is available to the person but is not being received, and certain payments under a workers’ compensation law or plan that is not being received by the person
The content of this definition, appears to bring together subsection 7(1) and (2) of the Old SABS. As a result, the only significant portion of this change appears to be that “net weekly payments for loss of income” has become “gross weekly payment for loss of income”.
Is OIRA deductible as Gross or Net?
Under the prior legislation (O. Reg. 403/96), the Jevco and Lacroix appeal decision (Appeal P04-00025) determined the actual money received by a claimant, after considering the tax deductions, is the amount to be deducted from the IRB. This amount represents the “net weekly payments for loss of income that are being received…”
At first glance it would appear the replacement of “net” with “gross” in the definition of OIRA must have been to put taxable and non-taxable payments for loss of income on equal ground, consistent with the change in calculating IRBs under the new legislation. Should this be the case, no consideration would be given to taxes deducted from the payments for loss of income, and the full gross amount would be deducted. This approach would also appear to give the term “gross” meaning within the context of OIRA.
It is important to note, however, that many in the industry currently have the opinion that OIRA remains deductible as received, meaning after taxes. We do concede there is certainly ambiguity around the combination of the terms “gross” and “received”, as it relates to the findings in Jevco and Lacroix.
As of the date this post was written, there are no FSCO decisions relating to OIRA.
Payments for Loss of Income
As is evident from above, OIRA is comprised of payments for loss of income. Rather than including a full description of this term here, we refer you to our specific blog on the topic: Changes to the Payments for Loss of Income (Collateral Benefits)
This is an important supplemental blog when reviewing what is deductible as OIRA.
Where does OIRA fall within the IRB Calculation Methodology?
Without replicating our blog on the IRB methodology under the new legislation, we will give you the highlights to put context on OIRAs place in the process.
Step 1 – Determine the Weekly Base Amount (s.7(2))
Step 2 – Deduct the total of all OIRA (s.7(1) “A”)
Step 3 – Apply the policy limit (s.7(1) “B”)
Step 4 – Deduct post-accident income (s.7(3))
For information purposes, the weekly base amount is 70 per cent of the pre-accident income plus 70 per cent of any post-accident losses from self-employment.
Of interest in s.7(1) “A” is the term “for the particular week the benefit is payable”. It would appear this was added to ensure OIRA received for periods beyond when an IRB is payable, are not considered in the calculation.
Further Guidance:
For additional guidance on OIRA and collateral payments for loss of income (O. Reg. 403/96), we recommend the ADS Blogs:
The key factors which indicate if benefits are deductible from an Income Replacement Benefit?
Sick Leave
If you have specific questions, please do not hesitate to contact us directly at answers@adsforensics.com or 1-800-380-7908 ext ASK (275).