Law
s.44(1),(3)
To provide workers who have a permanent impairment with a retirement income at age 65, the WSIB sets aside additional funds equal to 10% of every future economic loss (FEL) payment. These funds are deposited in a loss of retirement income (LRI) benefit account.
s.44(6),(7)
Workers whose account balance cannot generate a benefit of $1,000* or more per year receive a lump sum. Workers whose account balance can generate a benefit of $1000 or more per year may choose
- one of several payment schemes, and
-
one of several indexing factors to be applied to their benefit.
* The 1990 threshold. See 18-01-03, Benefit Dollar Amounts - Accidents before 1998 for indexed amounts.
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Guidelines
Definitions
For a definition of "spouse," "child," "dependent child," "other dependants," or "survivor," see 20-01-02, Definitions and Application Dates.
Account balance -- the sum of the funds set aside for a worker (10% of all FEL payments), and the investment income it has earned by the time the worker turns 65.
Annuity/payment scheme -- a set of monthly payments that distribute an account balance over a worker's lifetime, and after death.
FEL 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 90% 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.
The election form
A few months before a worker’s 65th birthday, the WSIB sends the worker a Loss of Retirement Income Benefit Election Form. On this form, workers indicate their choice of payment scheme and indexing factor. They must complete the form, sign it, and send it to the WSIB, to be received by the WSIB on or before their 65th birthday.
Payment schemes for retirement benefit
If a worker's account balance generates a benefit of $1,000 or more a year under each 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
-
Life
-
Life with return of account balance
-
Life with a fixed guarantee period
-
Life with a guarantee to age 90.
The payment schemes allow workers to decide how to distribute the account balance over the life of the benefit. While 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 they can in the short term.
The schemes are designed to make these options available while keeping the monetary worth of all the schemes equal.
Common factors
There are 4 common factors that contribute to the calculation of every worker’s monthly benefit. 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
Workers who qualify for monthly payments and who have a spouse receive a joint and survivor annuity, unless the worker and the spouse give up the spouse's claim to the annuity by co-signing a waiver. If the Waiver of Joint and Survivor Annuity is signed, these workers may choose any other payment scheme.
Worker without a spouse
Workers who qualify for monthly payments and who do not have a spouse may choose from the other payment schemes. If they do not make a choice, they receive the benefit as a life annuity with a fixed guarantee period of 10 years.
1. Joint and survivor annuity
This scheme provides workers with monthly payments from age 65 until death. If they are survived by a spouse, the spouse receives monthly payments equal to 60%, 75%, or 100% of the worker’s monthly payment, until death.
Workers set the level of payment to be made to their spouse on the election form.
By increasing the level of payment to be made to a surviving spouse, workers decrease their level of payment while they are 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 $20,000 account balance. He is married and his spouse is 61. Having set the level of his spouse’s payments at 60% of his own, Russell’s monthly payment is $160.22. If his spouse survives him, she will receive $96.13/month.
If Russell sets the level of his spouse’s payment at 75% of his own, he will receive $155.49/month, and his spouse will receive $116.62/month, if she survives him. If Russell sets his spouse’s payment at 100% of his own, the two payments will even out at $148.19 per month.
NOTE
Values are for illustration only. They assume no indexing.
2. Life annuity
This scheme provides workers with monthly payments from age 65 until death. It does not provide any payment after the worker's death. Monthly payments are based on the common factors alone.
Example
If Russell were single, or he and his spouse signed the Waiver of Joint and Survivor Annuity, and Russell then chose a life annuity, his monthly payment would be $182.44. This is higher than under the joint and survivor scheme because the anticipated payment period is shorter than it would be for both he and his spouse.
3. Life annuity with return of account balance
This scheme provides workers 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 it to the worker's estate as a lump sum.
Monthly payments are based on the common factors. The probability that the full account balance will be paid out is also factored into the calculation.
Example
If Russell elects to receive a life annuity with return of account balance, he will be paid $167.75/month up to his death. If he dies in the month he turns 70, he will have received $10,065. The $9,935 remaining in his account is paid to his estate.
4. Life annuity with a fixed guarantee period
This scheme provides monthly payments from age 65 until death. By choosing a guarantee period of either 5, 10, or 15 years, workers ensure that a payment will be made to their estate should they die before the guarantee period ends. The estate receives a lump sum equal to the value of the payments due to the worker for the remainder of the guarantee period. Workers who live beyond the guarantee period continue to receive payments until their death, but when they die, no payment is made to their estate.
Monthly payments are based on the common factors as well as the length of the guarantee period. The longer the guarantee period is, the lower the monthly payments are.
Example
If Russell chooses a life annuity with a guarantee period of
- 5 years, he will receive $178.63/month
- 10 years, " " $169.51/month
- 15 years, " " $158.32/month.
5. Life annuity with a guarantee to age 90
This scheme differs from the preceding one in that the guarantee period is set at age 90. Like the preceding scheme, it provides monthly payments from age 65 until the worker's death. If the worker dies before reaching 90, the value of the remaining payments due is paid to the worker's estate as a lump sum. Workers who live beyond age 90 continue to receive monthly payments, but no payment is made to their estate when they die.
Example
Under this scheme Russell would receive $137.75/month.
Choosing an indexing factor
Workers may choose to index the LRI benefit by 1%, 2%, or 3% annually, or they may choose to not index them at all. If a worker is survived by a spouse who is entitled to a benefit, the indexing factor applied to the worker's benefit also applies to the surviving spouse's benefit.
As with the choice of payment schemes, the choice of indexing factors allows workers to affect how their 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 ones.
If a worker does not choose an indexing factor, the WSIB does not index the LRI benefit.
What happens if a worker dies before reaching age 65?
When workers who are entitled to an LRI benefit die before they reach age 65, the WSIB pays a death benefit equal to the account balance to their spouse, dependents or estate.
The pre-retirement death benefit is paid to
- a surviving spouse, if there is one
-
any living dependent children (in equal shares), if there is no spouse
-
any living dependents (in equal shares), if there is no spouse, and there are no dependent children
-
the worker's estate, if there is no spouse, and there are no dependent children or living dependents.
This benefit is normally paid as a lump sum. However, if it can generate a pension of $1000 or more per year, it may be paid to a surviving spouse as a life annuity. To receive a life annuity, surviving spouses must, within 90 days of the WSIB notifying them of the right to elect, send the WSIB a signed request. At the same time, they can choose to index the life annuity by 1%, 2%, or 3% annually, or to not index it at all.
Survivors’ benefits
Anyone receiving WSIB survivor’s benefits is not eligible to receive an LRI benefit or pre-retirement death benefit.
For more information on survivors’ benefits, see section "Survivors" in the Operational Policy manual (OPM).
Retroactive adjustments to FEL benefits
If the WSIB makes a retroactive adjustment to the FEL benefit, and has already
- started making monthly payments, or
-
paid an LRI benefit or a pre-retirement death benefit as a lump sum
the WSIB pays the additional LRI benefit amount 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 (i.e., 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 once 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 a FEL benefit-related debt at any time.
Multiple accounts
If workers have more than one LRI benefit account when they turn 65, the WSIB combines these accounts before payment is made.
Application date
This policy applies to all decisions made on or after August 1, 2003, for accidents from January 2, 1990 to December 31, 1997.
Document history
This document replaces 18-04-17 dated April 7, 2008.
This document was previously published as:
18-04-17 dated January 3, 2007
18-04-17 dated October 12, 2004
05-07-02 dated August 1, 2003.
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References
Legislative authority
Workplace Safety and Insurance Act, 1997, as amended
Section 102, 103.1
Workers' Compensation Act, R.S.O. 1990, as amended
Section 44
O. Reg. 715/94
Minute
Board of Directors
#15, September 23, 1994, Page 5812
#4, April 5, 1991, Page 5439
Administrative
#5, September 18, 2009, Page 476 Back to top |