Document name

Annuities

Document number

POL 01/2024

Eligible compensation is the amount paid to compensate for earnings loss, which includes benefit payments made to:

• The worker or dependent spouse.
• The employer on behalf of the worker (salary continuance), and
• A third party on behalf of the worker (e.g., Employment Insurance, Maintenance Enforcement or Canada Revenue Agency).

Life annuity is a financial product that provides an individual with a monthly payment for the rest of their life. The amount of this monthly payment is based on the amount invested and the interest rates at the time the life annuity is purchased.

Qualifying period means a period exceeding 24 consecutive months in which the worker or dependent spouse receives eligible compensation for any portion of the month prior to reaching age 65. A single qualifying period may result from eligible compensation paid on more than one injury claim.

1. The Workers’ Compensation Act, 2013 (the “Act”) directs the Workers’ Compensation Board (WCB) to set aside an amount equal to 10 per cent of the compensation paid to a worker who received earnings loss benefits for more than 24 consecutive months (Section 73(3)).
2. The amount set aside with accrued interest must be used to provide an annuity for the worker at age 65 (Section 73(4)). It is the WCB’s intent to compensate for a reduction of retirement income caused by a workplace injury.
3. The minimum annuity amount is $25,000, adjusted annually by the percentage increase in the Consumer Price Index (CPI) (Section 73(1)).
4. The annuity amount may be set aside in the reserves of the WCB or paid into an established superannuation plan (registered pension plan) at the request of the worker. (Section 73(5)).
5. If the Board Appeal Tribunal (Tribunal) determines that the impact of the injury on the retirement income of the worker is inadequately compensated by the annuity payments and causes an undue hardship to the worker, the WCB may provide an annuity supplement (Section 74).
6. A dependent spouse who has been in receipt of eligible compensation for a period exceeding 24 consecutive months will be provided an annuity at age 65. An amount equal to 10 per cent of eligible compensation paid is set aside to provide for the annuity (Sections 81(1), 81(3), and 81(6)).

1. If a worker or dependent spouse receives eligible compensation for more than 24 consecutive months, the WCB will set aside an amount equal to 10 per cent of eligible compensation paid:
   1. During the qualifying period, and
   2. After the qualifying period up to the end of the month the worker or dependent spouse turns age 65.

2. An annuity amount will not be set aside on eligible compensation paid on any other work-related injury claim(s) that does not form part of the qualifying period. (i.e., claims that are less than 24 months in duration). 
3. The amount will be set aside until the last day of the month in which the worker reaches age 65, and together with accrued interest, will be used to provide an annuity for the worker or dependent spouse.
4. If the amount set aside in the worker’s annuity program (including any interest it has earned) is less than the minimum, the worker can either buy an annuity or have the full amount paid out as cash. The minimum annuity amount is adjusted each year by the percentage increase as noted in the Consumer Price Index (CPI) – Annual Increase procedure, and rounded up to the nearest $100.

Salary Continuance

5. Payments made to the employer on behalf of the worker (salary continuance) will be considered for the annuities qualifying period.
6. An amount will not be set aside on payments made to the employer while the worker is on salary continuance, unless the employer confirms that they are not contributing to the Canada Pension Plan (CPP) and/or an employer-sponsored pension plan on behalf of the worker.

Suspension of Benefits

7. If the suspension of benefits is a result of acceptable or unacceptable circumstances, or pregnancy, as outlined in the Suspension of Benefits policy, the qualifying period will:
   1. Pause regardless of the duration of the suspension, and
   2. Resume on the day of the first payment following the suspension.
8. Suspension of benefits as a result of incarceration as outlined in the Suspension of Benefits – While Incarcerated policy, will impact the qualifying period as follows:
   1. If the suspension is less than a full calendar month and the worker still receives compensation in a month (even for a period of less than a day), that month still counts as part of the qualifying period, or
   2. If the suspension is for a full calendar month, the qualifying period will restart on the day of the first payment following the suspension.

Interest

9. The annual interest rate is based on the internally calculated smoothed rate of return earned by the WCB’s investment portfolio. Interest will annually accrue:
   1. Beginning on the first day of the month following the qualifying period, and
   2. On the amount (principal and interest accrued from previous years) set aside to provide an annuity.
10. Interest will accrue on the current year at an estimated rate equal to the interest rate used for the immediate preceding year. At the end of each year, the WCB will calculate the actual annual interest rate and adjust the estimated accrued interest to the actual amount for any balances still set aside.
11. Accrual of interest will cease:
    1. Six months after the later of:
       1. The worker or dependent spouse reaching age 65, or
       2. The worker or dependent spouse being contacted by the WCB to purchase an annuity.
    2. Six months after the worker or dependent spouse turns 65, if the WCB has been unable to contact the worker or dependent spouse, or
    3. Six months after the death of a worker or dependent spouse.

12. If a worker’s earnings loss benefits are retroactively adjusted, interest on the annuity may be retroactively adjusted to the first of the month in which interest on the annuity would have accrued. The following criteria must be met before interest is adjusted:
    1. The decision to adjust compensation is made on or after January 1, 2003 (adjustments of compensation prior to January 1, 2003 are not eligible for annuity interest adjustments).
    2. The retroactive adjustment to compensation results in a net annuity change (increase or decrease) greater than $100, and
    3. The retroactive compensation adjustment period begins more than six months prior to the end of the month in which the adjustment is made.

Recurrence of a Work-Related Injury

13. If the worker has already qualified for an annuity, then returns to work and subsequently suffers a recurrence of the original injury, the WCB will continue to set aside annuity amounts in the month the worker is off work again as a result the recurrence of the original injury as the qualifying period has already been met.
14. If the qualifying period was not met prior to a return to work and the worker returns to work and later suffers a recurrence of the original injury:
    1. The initial months the worker was in receipt of compensation will not be used to establish entitlement to an annuity, and
    2. The qualifying period restarts.

Death before Age 65

15. If the worker or dependent spouse passes away prior to reaching 65 years of age, the principal sum with accrued interest will be paid to the worker’s or dependent spouse’s estate upon receipt of the death certificate or other proof of death and verification of the executor of the estate.
16. If the worker’s death was a result of the work-related injury for which they were receiving earnings loss benefits, annuity payouts will not reduce compensation payable to dependants.

Purchase of an Annuity

17. If the total amount set aside on all claims that have qualified for annuity contributions (even if those amounts relate to different injuries and different qualifying periods) as of the last day of the month in which the worker or dependent spouse reaches age 65 is equal to or greater than the minimum annuity amount, the worker or dependent spouse will be required to purchase a life annuity, which must be:
    1. Non-registered.
    2. Guaranteed to return the purchase price, and
    3. Payable in equal installments.
18. If the total amount set aside on all claims that have qualified for annuity contributions (even if those amounts relate to different injuries and different qualifying periods) as of the last day of the month in which the worker or dependent spouse reaches age 65 is less than the minimum annuity amount, they may choose a lump sum payout of the accumulated principal and interest in lieu of an annuity.
19. The minimum annuity amount will be based on the year the worker or dependent spouse reaches age 65 outlined in the Consumer Price Index (CPI) – Annual Increase procedure.
20. Upon evidence that the worker or dependent spouse has entered into a contract to purchase an annuity, the amount set aside will be paid to the annuity provider/company on behalf of the worker or dependent spouse.

Qualifying for Annuities after Age 65

21. If an annuity is payable as a result of an adjustment to previous earnings loss benefits for a worker or a dependent spouse over the age of 65:
    1. The worker or dependent spouse will be required to purchase an annuity if the principal and any retroactive interest is over the minimum annuity amount, or
    2. The worker or dependent spouse will receive a lump sum payout, in lieu of an annuity, if the principal and any retroactive interest is under the minimum amount.
22. If a worker has been previously paid annuity funds and an additional annuity amount is awarded after age 65, there will be no cumulative effect when determining if the amount payable is below the minimum.

Special Considerations

Alternate Annuities

23. In recognition of unusual circumstances where a life annuity would not sufficiently meet the objective of replacing the worker’s or dependent spouse’s reduction of retirement income, the WCB will consider requests for an alternate form of annuity on or after the worker or dependent spouse reaches age 65. The alternate annuity must:
    1. Be for the purpose of providing retirement income.
    2. Detail the terms, conditions and carrier of the alternate annuity.
    3. Guarantee the alternate annuity will:
       1. Return the principal portion of the annuity.
       2. Be payable from a non-registered fund, an
       3. Be payable for equal installments over a period of at least 10 years.
24. If the alternate annuity does not meet the criteria above, Finance will make a decision on a case-by-case basis. If the request is accepted, a Final Release form will be required.

Lump Sum Payouts

25. The WCB will consider requests for a lump sum payout due to terminal illness or foreign residency on a case-by-case basis.

Reconsideration of Decisions

26. Reconsideration of a decision will only be made by the Tribunal and is not subject to the regular appeal process.

Annuity Supplement

27. At the request of the worker the WCB may supplement their income on and after age 65 to increase the amount of income to the minimum amount of compensation (Section 75) then payable if:
    1. The worker is receiving annuity payments or has received a lump sum payout.
    2. The Tribunal determines that the impact of the injury on the retirement income of the worker is greater than the annuity payment(s), and
    3. The impact of the injury on the retirement income causes an undue hardship to the worker.
28. The annuity supplement will be paid on and after the day on which the worker reaches the age of 65 and will be paid monthly. The amount will be reviewed annually and adjusted based on the percentage increase in minimum compensation.

Overpayment

29. Claim overpayments may be recovered from any amounts payable to the worker or dependent spouse from the annuity account in accordance with the Overpayment Recovery – Compensation policy and procedure.

Enforcement Measures

30. Annuity funds will normally become payable at the time the worker or dependent spouse turns age 65 or passes away. Annuity funds will be subject to garnishment (Creditor or Judgment enforcement measures) if the notice or order is in effect at the time the annuity is payable or at any time any applicable legislation prescribes for the application of the enforcement measure, in accordance with the Attachment of Compensation policy and procedure.