Document name

Annuities

Document number

PRO 01/2024

POL 01/2024 provides guidelines for providing annuities. The following procedure details the steps for its ongoing operation.

Notice of Eligibility

1. How are workers or dependent spouses notified if they are eligible for annuities?
   1. The Annuity Management System (AMS) verifies that the qualifying period has been met and contributions are being set aside.
   2. A letter will be sent by Finance to the worker or dependent spouse informing that they have qualified for annuity contributions.
   3. In the first quarter of every year, Finance will forward an annual statement with the latest year-end annuity account balance, annual contributions and accrued interest earned during the year to the worker or dependent spouse.
   4. The worker or dependent spouse must notify the WCB of any change in address and contact information.

Section 73(5) – Superannuation Plan

2. What if the worker or dependent spouse requests that the amount set aside be paid into an established superannuation plan (registered pension plan) instead of leaving it in the Board’s reserves?
   1. This request can be considered. However, the registered pension plan must:
      1. Be an established superannuation plan (i.e., self-directed RRSP do not qualify), and
      2. Not allow the worker or dependent spouse to withdraw the funds before age 65.
   2. Finance will verify with the annuity provider that the terms of the registered pension plan meet the requirements noted above.
   3. The worker or dependent spouse must sign a final release that states they have received financial advice and understand the possible negative tax consequences of transferring their annuity into a registered superannuation plan.

Salary Continuance

3. What if the worker is on salary continuance with their employer?
   1. If the worker is on salary continuance, WCB will not set aside annuity contributions 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.
   2. A letter will be sent to employers after the 24-month qualifying period to verify if they contributed CPP and other pension on the worker’s behalf.

Suspension of Benefits

4. Will annuities be set aside if the worker’s or dependent spouse’s WCB benefits are suspended?
   1. Regardless of whether the suspension of benefits is a result of acceptable or unacceptable circumstances, or pregnancy, as outlined in POL 10/2021, Suspension of Benefits, the qualifying period will pause, regardless of the duration of the suspension, and will resume on the day of the first payment following the suspension. For example:
      1. If a suspension of three months occurs after 20 consecutive months of payment, the 21st month will be considered as that month where payment is first made following the suspension.
   2. If the suspension of benefits is a result of incarceration as outlined in POL 10/2016, Suspension of Benefits – While Incarcerated policy:
      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. For example:
         (a) If the worker was incarcerated for a year and then starts receiving eligible compensation again, the first payment after the suspension will count as the first month of the qualifying period (the count restarts).

Death before Age 65

5. What happens if the worker or dependent spouse passes away prior to reaching 65 years of age?
   1. If the worker or dependent spouse passes away prior to reaching 65 years of age, Finance will request:
      1. A copy of the death certificate or other proof of death, and
      2. Verification of the executor of the estate (e.g., lawyer letter, will, included in death certificate). 
   2. Upon receipt of the documentation noted above, Finance will process payment of the principal sum with accrued interest to the worker’s or dependent spouse’s estate.
   3. 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

6. Will the worker or dependent spouse be notified prior to the date the annuity payment(s) can be released?
   1. 60 days before an annuity first becomes payable at age 65, Finance will notify the worker or dependent spouse in writing of the annuity amount and their annuity payment options.
   2. If Finance is unable to contact the worker or dependent spouse (e.g., no current address or phone number), Finance will hold the payment until the worker or dependent spouse is located or until they contact the WCB.
7. What if the worker or dependent spouse delayed purchasing an annuity?
   1. The worker or dependent spouse will be advised by Finance that six months following the month in which they turn age 65:
      1. The amounts set aside will no longer be earning any interest, and
      2. If no response is obtained, only annual reminders to purchase an annuity will be forwarded to workers or dependent spouses.
   2. If Finance is unable to contact the worker or dependent spouse (e.g. no current address or phone number), accrual of interest will stop six months after the worker or dependent spouse turns age 65 without notification being sent.

Qualifying for an Annuity after age 65

8. What if an annuity is payable as a result of an adjustment to previous compensation benefits for workers or dependent spouses over the age of 65?
   1. If the adjustment results in additional annuity payable amount, Finance will notify the worker or dependent spouse:
      1. The net amount payable, and
      2. That interest will accrue on the adjusted amount for a period of up to six months from the date the worker or dependent spouse is notified of the additional annuity amount payable.
   2. If the adjustment results in a reduction of the annuity amount payable, it will be added to the total of any other annuity amounts still payable. The following outlines the possible scenarios:
      1. If the net amount payable, after the adjustment is added, is positive and the total is above the minimum annuity amount, the worker or dependent spouse will be asked to purchase an annuity.
      2. If the net amount payable, after the adjustment is added, is positive and the total is below the minimum annuity amount, the worker or dependent spouse will be eligible for a lump sum payout, or
      3. If the net amount payable, after the adjustment is added, is negative, the worker or dependent spouse will not be required to repay the amount regardless of any annuity amounts previously paid out.
   3. If a worker or dependent spouse 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. For example:
      1. A worker or dependent spouse who purchased a $30,000 annuity in 2016 becomes entitled in 2020 to an additional annuity amount of $5,000 (principal together with any retroactive interest). They may elect to receive a lump sum payout even though the total for the two annuity amounts ($35,000) is greater than the minimum annuity amount.
      2. If the new annuity entitlement is greater than the minimum annuity amount, the worker or dependent spouse will be required to purchase an annuity.

Special Considerations – Lump Sum Payouts

Foreign Residents

9. If a worker or dependent spouse has foreign residency, are they able to request a lump sum payout rather than an annuity?
   1. The worker or dependent spouse must determine if the banking system in their country of residence allows for the purchase of an annuity. Finance will confirm this information.
      1. If yes, the worker or dependent spouse will be required to purchase an annuity. 
      2. Otherwise, if efforts have been made to purchase an annuity and the worker or dependent spouse are still unable to do so, they may submit a written request for a lump sum payout to Finance.
   2. To recognize the challenges for non-residents to search for an acceptable investment vehicle, Finance will review files for non-residents and submit a lump sum payout request for Board Appeal Tribunal’s (Tribunal) consideration on behalf of the worker or dependent spouse. Prior to submitting a request to the Tribunal, Finance will:
      1. Provide the Tribunal with confirmation of the worker’s non-resident status, and
      2. Confirm that the worker or dependent spouse has made a reasonable attempt to purchase an annuity or its equivalent (GIC or other registered/non-registered product) in Canada or in the worker’s place of residence.
   3. Where appropriate, the Tribunal will approve the lump sum payout request, conditional upon execution of the releases, indemnity agreement and/or other required legal documentation in a written decision to the worker or worker’s dependent..

Terminal Illness

10. What if a worker or dependent spouse who is terminally ill submits a request for a lump sum payout?
    1. Finance will ask the worker or dependent spouse to obtain a medical report from their physician, which provides information about their prognosis. If it has been determined that the terminal illness is imminent (i.e., weeks to months), the lump sum payout request will be submitted for review by the Tribunal. The Tribunal will provide a written decision to the worker or worker’s dependent. 

Annuity Supplement

11. How can workers request a monthly annuity supplement?
    1. Workers who have received a lump sum annuity payout or are receiving monthly annuity payments may request a monthly annuity supplement if the impact of the injury on the retirement income:
       1. Is greater than the annuity payments, and
       2. Causes an undue hardship to the worker.
    2. To request a monthly annuity supplement, the worker must contact Finance, who will then verify if the worker is receiving annuity payments or has received a lump sum payout. Finance will require the worker to submit their financial information and Board Services will prepare the request for review by the Tribunal. 
12. How does the WCB assess eligibility if the worker who is receiving annuity payments requests an annuity supplement?
    1. Finance will request income verification information from the worker including their most recent income tax returns and net worth statements. They will then use the following three-step analysis:
       1. Confirm whether the amount of the total current monthly retirement income is below the statutory minimum compensation for the year the worker turns 65 by verifying the worker’s:
          (a) Canada Pension Plan (CPP).
          (b) Old Age Security.
          (c) Annuity payments that result from the purchase of an annuity with funds provided by the WCB annuity program.
          (d) Other annuity payments, and
          (e) Other employer-related pension.
       2. Confirm whether the worker’s injury has caused a reduction in retirement income. To determine this, Finance will:
          (a) Calculate what the worker’s monthly CPP income would have been if the injury did not occur using the gross earnings reported on the claim, indexed yearly for the Consumer Price Index (CPI), and the CPP Statement of Contributions, and
          (b) Compare the calculated figure to the amount the worker is currently receiving.
       3. Confirm whether the reduction of retirement income determined in the second step has not been adequately compensated by the annuity payments. If the monthly CPP and annuity payment is less than the estimate of what the CPP would have been had the injury not occured, then there is a reduction in retirement income.
    2. Finance will send the worker’s request for the supplement along with the supporting documentation and the results of the above analysis to Board Services. Board Services will prepare the package for review by the Tribunal and will communicate the Tribunal’s decision to Finance and the worker. Finance will process the annuity supplement accordingly.
13. How will the annuity supplement be paid?
    1.  The monthly annuity supplement will be paid:
       1. Retroactive to the date the annuity payments began (i.e., either the date that monthly annuity payments began or the date that a lump sum was paid to the worker), and
       2. Based on minimum compensation, as noted in the Minimum Compensation (Section 75) procedure.
    2. For lump sum annuity payouts, the annuity supplement will be based on the minimum compensation at the time of the Tribunal’s decision to supplement.
14. Will the annuity supplement be reviewed annually?
    1. A Payment Specialist will review the annuity supplement annually and adjust the monthly amount based on the percentage increase in minimum compensation as of January 1st of each year. A letter advising of the supplement amount for each year will be sent by the Payment Specialist to the worker.
    2. In accordance with the Minimum Compensation (Section 75) procedure, if the minimum compensation for the current year is less than the previous year, there will be no adjustment.