Law
s.45(2)
To replace a worker's lost retirement income, the WSIB sets aside funds for a worker who has received loss of earnings (LOE) payments for 12 continuous months. The funds equal 5% of the amount of every subsequent LOE payment.
s.45(3)
In addition to the funds set aside by the WSIB, the worker may voluntarily contribute 5% of every subsequent LOE payment toward the loss of retirement income (LRI) benefit. The decision to make voluntary contributions is irrevocable.
s.45(5)
When the worker reaches age 65, he or she is entitled to receive the LRI benefit. The amount of the LRI benefit is the sum of the mandatory contributions, and the worker’s voluntary contributions, if any, plus the accumulated investment income.
s.45(6)
A worker whose account balance generates a benefit of $3,000* or more per year may choose
- one of 3 payment schemes, and
- one of several indexing factors to be applied to the benefit.
* This is the July 1, 2007 amount. See 18-01-02, Benefit Dollar Amounts - Accidents from 1998 for the indexed amounts from 1998 to 2007 and from 2007 onwards.
A worker whose account balance does not generate a benefit of $3,000 or more per year receives a lump sum.
s.45(7),(7.1)
If the worker dies before age 65, the survivors, designated beneficiary, or estate are entitled to receive the LRI benefit. Survivors who are entitled to s.48 benefits are not entitled to the mandatory contributions, plus the accumulated investment income.
s.45(12),(13)
Both the WSIB's mandatory contributions and the worker's voluntary contributions, if any, are deposited in a fund and invested.
Age restriction - s.45(1)
A worker who is 64 years or older on the date of the injury is not eligible for the LRI benefit.Back to top
Guidelines
Definitions
For a definition of “spouse,” “child,” “dependent child,” “other dependants,” or “survivor,” see 20-01-02, Definitions and Application Dates.
12 continuous months -- 12 months in which there are no single interruptions for one month or more.
The WSIB considers 12 months of lost earnings continuous even if there are interruptions of less than a month in which the worker's earnings are fully restored. Such interruptions do not break continuity, even if there are multiple interruptions that together add up to more than one month. However, if there is an interruption of more than one month in which the worker's earnings are fully restored, the 12 months are not considered continuous. If, after an interruption of longer than a month, the worker again suffers a loss of earnings, 12 months must be counted from the most recent loss of earnings to be considered continuous.
Account balance -- the sum of the funds set aside by the WSIB on behalf of a worker and funds contributed by the worker, if any, and the investment income it has earned by the time the worker turns 65, or date of death, whichever comes first.
Annuity/payment scheme -- a set of monthly payments that distributes the account balance based on the payment option selected by the worker.
Designated beneficiary -- a person chosen by the worker to receive, in the event of the worker's death before age 65, the pre-retirement death benefit, and if the worker elected to make voluntary contributions, the supplementary pre-retirement death benefit.
LOE Payment -- the actual amount of monies paid to the worker (prior to any redirection, see 18-01-06, Redirected Benefit Payments). This amount is equal to 85% of the difference between the worker's pre-injury net average earnings and the post-injury net average earnings which include any Canada/Quebec Pension Plan disability payments the worker may receive for the injury. See 18-01-13, Calculating CPP/QPP Offsets from FEL/LOE Benefits.
Pre-retirement death benefit – the amount of the mandatory contributions, plus the accumulated investment income. This benefit is paid in the event that the worker dies of a non-work-related injury or disease before age 65.
Supplementary pre-retirement death benefit – the amount of the voluntary contributions, plus the accumulated investment income. This benefit is paid in the event that the worker dies from either a work-related or non-work-related injury or disease before age 65.
Information required by WSIB
Before 12 continuous months
Before the worker has received LOE benefits for 12 continuous months, the WSIB sends the worker an Optional 5% Election Form as well as a Designation of Beneficiary Form and asks that both forms be completed, signed, and returned to the WSIB.
Before worker's 65th birthday
A few months before a worker's 65th birthday, the worker is sent a Loss of Retirement Income Information package for completion. For workers who have an account balance that may generate a benefit of $3,000 or more per year, a Loss of Retirement Income Benefit Election Form is included. On this form, workers indicate their choice of payment scheme and indexing factor. They must complete, sign, and send the form to the WSIB on or before their 65th birthday.
Worker between 63 and 64 on day of injury
If a worker is between 63 and 64 years of age on the day of injury and continues to receive LOE benefits for up to two years, the worker may become eligible to receive the LRI benefit after his or her 65th birthday.
For these cases, all references to the worker's 65th birthday are assumed to refer to the date the worker becomes eligible to receive the LRI benefit.
Payment schemes for retirement benefit
If a worker's account balance generates a benefit of $3,000 or more a year under all of the payment schemes, the WSIB pays the benefit monthly, according to the payment scheme the worker elects.
The payment schemes are
- Joint and survivor annuity
- Life annuity with return of worker account balance
- Life annuity with guarantee to age 70.
These schemes allow workers to decide how to distribute the account balance over the life of the benefit. Some workers may decide to have their benefit provide for a surviving spouse or estate and/or to have it indexed to increase each year. Other workers may prefer to get the highest monthly amount possible in the short term. The monetary worth of all three schemes is equal.
Common factors
There are four factors that contribute to the calculation of the amount of every worker's annuity. They are
- the worker's account balance at age 65
- the life expectancy for workers at age 65
- the level of interest rates when the worker is 65, and
- the indexing factor chosen.
Other factors which may contribute to the calculation, i.e., provision for survivors, or full payout of the account balance, are noted under each annuity.
Worker with a spouse
A worker with a spouse who is entitled to receive monthly payments receives a joint and survivor annuity, unless both the worker and the spouse give up the spouse's claim to the annuity by cosigning the Waiver of Joint and Survivor Annuity. If the waiver is signed, the worker may choose the life annuity with return of worker account balance or the life annuity with guarantee to age 70.
Worker without a spouse
A worker without a spouse who qualifies for monthly payments may choose the life annuity with return of worker account balance or the life annuity with guarantee to age 70. A worker who does not make a choice by his or her 65th birthday receives the LRI benefit as a life annuity with a return of worker account balance. This is referred to as the "default".
1. Joint and survivor annuity
This scheme provides a worker with monthly payments from age 65 until death. If the worker is survived by a spouse, the spouse receives monthly payments equal to 60%, 75%, or 100% of the worker's monthly payment until the spouse's death.
A worker sets the level of payment to be made to the spouse on the Loss of Retirement Income Benefit Election Form. If the worker does not choose a payment level, it is automatically set at 60%.
Increasing the level of payment to a surviving spouse decreases the level of payment to the worker while the worker is alive.
Monthly payments are based on the common factors and
- the average life expectancy of the worker's spouse, and
- the level of payment chosen for the spouse.
If the worker survives the spouse, payments continue for the worker's lifetime. Once the worker dies, the scheme does not provide for payment to anyone else, not even the worker's estate.
Examples
Russell has a $47,000 account balance. He is married and his spouse is 62. Having set the level of his spouse's payments at 60% of his own, Russell's monthly payment is $279.69. If his spouse survives him, she will receive $167.81/month.
If Russell sets the level of his spouse's payment at 75% of his own, he will receive $268.65/month, and his spouse will receive $201.49/month, if she survives him. If Russell sets his spouse's payment at 100% of his own, the two payments will each be $252.05 per month.
NOTE
Values are for illustration only. They have not been indexed.
Spouse after age 65
Only the person who was the worker's spouse at the time of the worker's 65th birthday is eligible to receive the survivor annuity.
Therefore, if a worker marries or enters into a spousal relationship (as defined above) after the age of 65, that spouse is not eligible to receive the annuity.
2. Life annuity with return of worker account balance
This scheme provides a worker with monthly payments from age 65 until death. When the worker dies, the WSIB calculates the difference between the original account balance and the amount paid out to the worker, and pays the difference to the worker's estate as a lump sum. Payments made to the estate are based on "present value."
Monthly payments are based on the common factors and the probability that the full account balance will be paid out.
Example
Marta has a $47,000 account balance. Under this scheme she will be paid $296.09/month until her death. If she dies in the month she turns 73, she will have received $28,425. The $18,575 remaining in her account is paid to her estate.
3. Life annuity with guarantee to age 70
This scheme provides a worker with monthly payments from age 65 until death. By choosing a guarantee to age 70, the worker ensures that a payment will be made to the estate should he or she die before the guarantee period ends. The estate receives a lump sum equal to the commuted value of the payments due to the worker for the remainder of the guarantee period. Payments made to the estate are based on "present value." A worker who lives beyond the guarantee period continues to receive payments until death, but no payments are made to the estate after death.
Monthly payments are based on the common factors and the probability that the full account balance will be paid out.
Example
Lester has a $47,000 account balance. Under this scheme Lester would receive $329.82/month until death. The guaranteed amount is $19,789. If he dies in the month he turns 67, he will have received $7,916. The remaining guaranteed amount of $10,848 is paid to the estate.
Choosing an indexing factor
A worker may choose to index the LRI benefits by 1%, 2%, or 3% annually, or may choose not to index them at all. For the joint and survivor annuity, the indexing factor chosen applies to both the worker's and the surviving spouse's payments.
If a worker does not choose an indexing factor, the WSIB does not index the LRI benefit.
As with the choice of payment schemes, the choice of indexing factors allows the worker to affect how the LRI benefits are distributed over the payment period. Indexing does not increase the overall value of the benefit. It only increases the amount of the later payments by decreasing the amount of the earlier payments.
Death before age 65 — non-work-related
If a worker who is eligible to receive an LRI benefit dies before age 65 of a non-work related injury or disease, the WSIB pays to the worker's survivor(s), designated beneficiary, or estate, the pre-retirement death benefit, and the supplementary pre-retirement death benefit.
Hierarchy of survivors
The pre-retirement death benefit (and the supplementary pre-retirement death benefit, if there is one) is paid to the worker's
- surviving spouse, if there is one
- dependent children, if there is no spouse
- other dependants, if the worker had neither a spouse nor any dependent children
- designated beneficiary,
- estate.
The WSIB divides payments equally among dependent children or other dependants.
Payment of benefits
The WSIB normally pays the pre-retirement death benefit (and the supplementary benefit, if there is one) as a lump sum.
If there is a surviving spouse, and the total of both benefits can generate an annual payment of at least $1,142.20* the spouse may choose to receive it as a life annuity with return of survivor account balance.
If the worker's surviving spouse is eligible for an annuity, the WSIB will inform the spouse. To receive the annuity, the spouse must send a signed request to the WSIB within 90 days of learning of the option.
*This is the 1998 amount from Ontario Regulation 562/99. This amount may vary due to annual indexing.
Death of spouse
If the surviving spouse subsequently dies, the remainder of the account balance, if any, is paid to the spouse's estate.
Death before age 65 — work-related
If a worker who is eligible to receive an LRI benefit dies before age 65 of a work-related injury or disease, the WSIB pays the supplementary pre-retirement death benefit and survivor benefits, see section "Survivors" in the Operational Policy manual (OPM), to
- the surviving spouse, if there is one
- dependent children, if there is no spouse,
- other dependants, if the worker had neither a surviving spouse nor dependent children.
Survivors are not entitled to receive the pre-retirement death benefit.
No survivors
If there are no survivors, the WSIB pays the supplementary pre-retirement death benefit to
- the designated beneficiary, or
- the estate, if there is no designated beneficiary.
Neither the designated beneficiary nor the estate are entitled to either the pre-retirement death benefit or to survivor benefits.
Death after age 65 — work-related
If a worker dies after age 65 of a work-related injury or disease and is survived by a spouse, the spouse is eligible to receive
- the survivor annuity (if the worker chose the joint and survivor annuity payment scheme), as well as
- survivors' benefits.
If a worker
- chose the joint and survivor annuity payment scheme, but
- the spouse pre-deceases the worker
the survivors, if any, are only entitled to receive survivors’ benefits.
If a worker did not have a spouse at age 65
- the survivors, if any, are eligible to receive survivor benefits, and
- the estate is eligible to receive the remaining amount of the return of worker account balance, or the guarantee to age 70, as the case may be.
LOE commutations
Under certain conditions a worker may have his or her LOE benefit commuted to a lump sum, see 18-03-05, Commutations. When this occurs, the WSIB makes a one-time mandatory contribution based on 5% of the lump sum LOE benefit. Similarly, the worker can make a one-time voluntary contribution based on 5% of the lump sum LOE benefit.
Example
Betty has been receiving LOE benefits for 72 months, and wants to have the benefit commuted to a lump sum. Since the 13th month, the WSIB had been making mandatory contributions on her behalf. Now, the WSIB will set aside in her LRI benefit account, an amount equal to 5% of the lump sum LOE benefit.
NOTE
If the LOE benefit is commuted before the worker is paid for 12 continuous months, the WSIB would make a one-time contribution based on 5% of the commuted value of the amount that would have been paid from the 13th month to the worker’s 65th birthday.
Retroactive increases to LOE benefit
If the WSIB retroactively increases the LOE benefit, and has already
- started making monthly annuity payments, or
- paid an LRI benefit or a pre-retirement death benefit as a lump sum,
the WSIB pays the additional LRI benefit or pre-retirement death benefit as a lump sum.
Assignments, garnishments, and support deduction orders
LRI benefits are subject to assignments, garnishments, and support deduction orders only when the LRI benefit is payable (e.g., when the worker reaches age 65). The policies on redirected benefit payments, see 18-01-06, Redirected Benefit Payments, and automatic deduction for family support, see 18-01-07, Automatic Deduction for Family Support, apply in these circumstances.
Benefit-related debts
Benefit-related debts are recoverable from an LRI benefit account only at the time the LRI benefit or pre-retirement death benefit is payable. The policy on recovery of benefit-related debts, see 18-01-04, Recovery of Benefit-Related Debts, applies in these circumstances.
Account maintenance
If mistakes are made in the maintenance of the LRI benefit account, i.e., incorrect entries or transfers, the WSIB may make corrective adjustments at any time. For example, the WSIB can correct an entry resulting from an LOE recalculation at any time.
Multiple accounts
If a worker has more than one LRI benefit account at age 65, the WSIB combines these accounts before payment is made.
Application date
This policy applies to all decisions made on or after July 1, 2007, for all accidents on or after January 1, 1998.
Document history
This document replaces 18-03-07 dated April 7, 2008.
This document was previously published as:
18-03-07 dated October 3, 2007
18-03-07 dated July 3, 2007
18-03-06 dated January 3, 2007
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References
Legislative authority
Workplace Safety and Insurance Act, 1997, as amended
Sections 45, 62(2)
0. Reg. 562/99, as amended
Minute
Administrative
#4, September 18, 2009, Page 476 Back to top |