Document name
Annuities
Document number
PRO 05/2020

Effective date: January 1, 2021

Approved date: October 20, 2020

Application: Workers injured on or after January 1, 1980
Dependent spouses on or after January 1, 1989

Policy subject: Annuities and pensions

Purpose:

To provide guidelines for the administration of annuities.

BACKGROUND

Policy section content
Section detail

POL 05/2020 provides guidelines for providing annuities. The following procedure details the steps for its ongoing operation.

PROCEDURE

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Section detail

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 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.
    4. The worker or dependent spouse must notify the WCB of any change in address and contact information.

Section 73(5) – Superannuation Plan

  1. 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. 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 meets 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

  1. What if the worker is on salary continuance?
    1. If the worker is on salary continuance, WCB will not set aside annuity contributions unless it has been confirmed that the employer is 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

  1. Will annuities be set aside if the worker’s or dependent spouse’s WCB benefits are suspended?
    1. If the suspension of benefits is a result of acceptable or unacceptable circumstances, or pregnancy, as outlined in POL 15/2016, Suspension of Benefits or POL 01/2008, Suspension of Benefits - Pregnancy, the qualifying period will pause, regardless of the duration of the suspension, and 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:
      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).

Purchase of an Annuity

  1. Will the worker or dependent spouse be notified prior to the annuity payment(s)?
    1. 60 days before an annuity first becomes payable at age 65, Finance will notify the worker or dependent spouse in writing.
    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.
  2. What if the worker or dependent spouse delayed purchasing an annuity?
    1. The worker or dependent spouse will be advised that six months following the month in which they turn age 65:
      1. Their accounts 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

  1. 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 6 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 pay back 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

  1. If a worker or dependent spouse has foreign residency, are they able to request for a lump sum payout?
    1. If the banking system in their country of residence allows for the purchase of an annuity, the worker or dependent spouse will be required to purchase an annuity. 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 request for a lump sum payout.
    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 Members’ consideration on behalf of the worker or dependent spouse. Prior to submitting a request to the Board Members, Finance will:
      1. Provide the Board Members 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, Board Members will approve the lump sum payout request, conditional upon execution of the releases, indemnity agreement and/or other required legal documentation.

Terminal Illness

  1. What if a worker or dependent spouse who is terminally ill submits a request for a lump sum payout?
    1. Finance will obtain and review the worker’s or dependent spouse’s medical 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 Board Members.

Annuity Supplement

  1. How does the WCB assess eligibility if the worker or dependent spouse who is receiving annuity payments requests an annuity supplement?
    1. Board Services will verify if there is a reduction in retirement income using the following three-step analysis:
      1. Confirming whether the amount of the 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. Determining whether the worker’s injury has caused a reduction in retirement income. To assist Board Services in making their decision, 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. Verifying 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 occurred, then there is a reduction in retirement income.
    2. To assess whether the reduction in retirement income causes undue hardship to the worker, Board Services may require the worker’s or dependent spouse’s tax returns and net worth statements. The Board Members will do an overall assessment of how the reduction in retirement income negatively impacted the worker.

Policy references

Policy reference content

Section heading

Legislative Authority

Section detail

The Workers’ Compensation Act, 2013
Sections 2(1)(h), 73, 74, 75, 81

Section heading

Document History

Section detail

(1) POL and PRO 13/2013, Annuities (effective January 1, 2014 to December 31, 2020).
(2) Bill 58, an amendment to The Workers’ Compensation Act, 2013, to set the minimum annuity amount at $25,000 (effective January 1, 2014).
(3) POL 10/2008, Annuities (effective January 1, 2003 to December 31, 2013).
(4) PRO 04/2005, Annuities (effective January 1, 2003 to December 31, 2013).
(5) POL 04/2005, Annuities (effective January 1, 2003; however superseded by POL 10/2008 which was approved August 5, 2008 and made effective January 1, 2003).
(6) POL and PRO 04/2003, Annuities (effective January 1, 2003; however superseded by POL and PRO 04/2005 which was approved September 22, 2005 and made effective January 1, 2003).
(7) Bill 72, an amendment to The Worker’s Compensation Act, 1979, to state that if the amount set aside is less than $20,000, the worker or dependent spouse may receive a lump sum, in lieu of an annuity, at age 65 (effective January 1, 2003).
(8) POL and PRO 09/2002, Annuities (effective January 1, 2003; however superseded by POL and PRO 04/2003 which was approved May 13, 2003 and made effective as of January 1, 2003).
(9) POL and PRO 08/2000, Annuities (effective November 14, 2000 to December 31, 2002).
(10) POL 02/1999, Annuities (effective February 1, 1999 to November 13, 2000).
(11) POL 11/95, Modifications to Existing Policies on Annuity Provisions (effective 1995 to January 31, 1999).

Section heading

Complements

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