Vol. 150, No. 22 — November 2, 2016
SOR/2016-274 October 21, 2016
OLD AGE SECURITY ACT
Regulations Amending the Old Age Security Regulations
P.C. 2016-931 October 21, 2016
His Excellency the Governor General in Council, on the recommendation of the Minister of Employment and Social Development, pursuant to section 34 (see footnote a) of the Old Age Security Act (see footnote b), makes the annexed Regulations Amending the Old Age Security Regulations.
Regulations Amending the Old Age Security Regulations
1 Subsection 21(8) of the Old Age Security Regulations (see footnote 1) is replaced by the following:
(8) For the purposes of section 4.1 of the Act as it relates to the requirement of subparagraph 3(1)(c)(iii) of the Act, the prescribed information is,
- (a) in the case of a person who is in receipt of or has been approved for a retirement, disability or survivor’s pension under the Canada Pension Plan or a retirement, disability or surviving spouse’s pension under An Act respecting the Québec Pension Plan, CQLR, c. R-9, information indicating that the person, for at least 40 years, for all or part of each of those years,
- (i) had unadjusted pensionable earnings under the Canada Pension Plan that were above the person’s basic exemption for that year, or had unadjusted pensionable earnings under An Act respecting the Québec Pension Plan that were above the person’s personal exemption for that year,
- (ii) received a retirement pension or disability pension under either the Canada Pension Plan or An Act respecting the Québec Pension Plan, or
- (iii) had time excluded from a contributory period under the Canada Pension Plan because the person was a family allowance recipient, or had time not included in a contributory period under An Act respecting the Québec Pension Plan because the person was a recipient of family benefits; or
- (b) in the case of a person who is not in receipt of and has not been approved for a retirement, disability or survivor’s pension under the Canada Pension Plan or a retirement, disability or surviving spouse’s pension under An Act respecting the Québec Pension Plan, CQLR, c. R-9, information indicating that the person,
- (i) for at least 40 years, for all or part of each of those years, met the requirements set out in subparagraph (a)(i), (ii) or (iii), and
- (ii) for the most recent calendar year for which the filing due date has passed and for at least 40 of the years referred to in subparagraph (i), other than for 1969, 1970 and 1971, filed an income tax return as a resident of Canada with the Minister of National Revenue.
2 Paragraphs 22(2)(a) and (b) of the Regulations are replaced by the following:
- (a) a current address in Canada; and
- (b) the information that is referred to in
- (i) paragraph 21(8)(a), in the case of a person who is in receipt of or has been approved for a retirement, disability or survivor’s pension under the Canada Pension Plan or a retirement, disability or surviving spouse’s pension under An Act respecting the Québec Pension Plan, CQLR, c. R-9, or
- (ii) paragraph 21(8)(b), in the case of a person who is not in receipt of and has not been approved for a retirement, disability or survivor’s pension under the Canada Pension Plan or a retirement, disability or surviving spouse’s pension under An Act respecting the Québec Pension Plan, CQLR, c. R-9.
Coming into Force
3 These Regulations come into force on November 1, 2016.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Canada’s population is aging, and this is projected to increase the workload required for processing Old Age Security (OAS) benefit applications. The number of OAS pensioners is expected to increase by over 60% within the next 15 years, growing from 5.9 million in 2016 to 9.5 million by 2030. In addition, ageing information technology infrastructure and business processes related to the processing of OAS applications are challenging the ability of Employment and Social Development Canada (the Department or ESDC) to provide timely and effective service to Canadians.
Old Age Security program
The objective of the OAS program is to ensure a minimum income to seniors, and to help reduce the incidence of low income among this population. OAS benefits include the basic OAS pension, which is paid to all individuals aged 65 and over who meet the legal status and residence requirements, the Guaranteed Income Supplement (GIS) for low-income seniors, and the Allowances for low-income individuals aged 60 to 64 who are the spouses or common-law partners of GIS recipients, or who are widows or widowers. OAS benefits are indexed quarterly to reflect increases in the cost of living. The OAS program is financed from general tax revenues.
The amount of a person’s OAS pension is determined by how long he or she has lived in Canada. To qualify for a full OAS pension, a person must have lived in Canada for at least 40 years after the age of 18. A person is eligible for a partial pension if he or she has lived in Canada between 10 and 40 years after the age of 18.
In addition, an individual must be lawfully in Canada, pursuant to the immigration laws of Canada, on the day preceding the day on which their OAS application is approved. For those applying outside of Canada, they must have been lawfully in Canada on the day prior to the day they ceased to reside in Canada for the last time.
In light of Canada’s aging population, it is expected that there will be a significant increase in the workload required to process OAS benefit applications and to maintain accurate and timely benefit payments. In recognition of these pressures, in 2012, the Jobs, Growth and Long-term Prosperity Act introduced amendments to the Old Age Security Act (OAS Act) to implement automatic enrolment. This regime was designed to eliminate the need for many seniors to apply for OAS benefits by automatically enrolling them. (see footnote 2)
Under automatic enrolment, a combination of data elements allows the Minister of ESDC (the Minister) to waive an OAS pension application and, in the absence of any information to the contrary, presume eligibility to a full OAS pension.
Once an individual is selected for automatic enrolment, the individual must be notified in writing of the Department’s intent to waive their application for a pension, and the information that the Minister intends to use to determine their eligibility must be provided to them. Unless the Minister is otherwise advised, the individual’s application will be deemed to have been made and approved the day of their 65th birthday. Once the application is approved, a Notice of Entitlement letter will be sent to the individual outlining the date the pension becomes effective, the payment amount and their right to request a reconsideration or an appeal.
Changes to the OAS Act
The legislative provisions for all phases of automatic enrolment have already been enacted in the OAS Act. In the case of the OAS pension, they were brought into force in March 2013, through an Order in Council. (see footnote 3) These provisions
- — allow the Minister to presume that a person meets the residence and legal status requirements for a pension without the need for documentary evidence;
- — provide the Minister with the discretion to waive the requirement for an application for the OAS pension at age 65, when the Minister is satisfied that, on the basis of the information obtained under the OAS Act, the individual meets the eligibility requirements for this pension;
- — require that the Minister inform the individual of the information that will be used to approve the payment of a pension, and require the individual to correct any inaccuracies regarding the information on which the Minister intends to rely;
- — allow a person, before the day on which they attain 65 years of age, to decline a waiver of the requirement for an application. For example, an individual may choose to defer receipt of their OAS pension at age 65 in order to receive a higher pension at a later date. He or she would then submit an application to receive a higher benefit in the future;
- — provide the Minister with the discretion to request an OAS application from an individual who was informed that it would be waived (for example if new information was discovered by the Department, which called eligibility into question); and
- — allow the Minister to cancel a pension after the commencement of payment upon request from the pensioner, in which case the amount of any pension received is repaid and the pension deemed not to have been payable.
Automatic enrolment — Category 1
Automatic enrolment is being implemented in a phased-in approach. The first phase, which started in April 2013, implemented automatic enrolment for Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) beneficiaries who are eligible to receive a full OAS pension (Category 1 individuals). Amendments were brought to the Old Age Security Regulations (OAS Regulations), which allowed the Minister to automatically enroll, for a full OAS pension, Canadian residents who, at age 64, are in receipt of a CPP or QPP retirement, disability or survivor benefit, and who have a combination of 40 years or more of participation (see footnote 4) in the CPP or the QPP, as well as a Canadian home address. CPP or QPP participation is used as a “proxy” to presume that a person has resided in Canada for at least 40 years after the age of 18.
In the absence of any evidence to the contrary, Category 1 individuals’ legal status in Canada is also presumed at age 64, provided they meet the residence proxy and that they have a Canadian home address. The amendments also specify the effective date of approval for a waived OAS pension, under automatic enrolment, to be the day the individual attains the age of 65.
Since the inception of automatic enrolment, 45% of new OAS pensioners have been approved for a full OAS pension through automatic enrolment.
With automatic enrolment in place for Category 1 individuals, the Department will now expand automatic enrolment to Category 2 individuals, beginning in November 2016.
The objective of the Regulations Amending the Old Age Security Regulations (the amendments) is to improve services and create administrative efficiencies by increasing the number of seniors who can receive the full OAS pension through automatic enrolment, thus removing the burden for seniors of completing applications and reducing administrative costs to Government.
Automatic enrolment — Category 2
To continue expanding automatic enrolment to more individuals, the amendments include automatic enrolment for a full OAS pension for a second category of individuals (Category 2). These are individuals who have 40 years of CPP or QPP participation and 40 years of tax filing, but are not in receipt of a CPP or QPP retirement, disability, or survivor benefit (e.g. an individual who is deferring receipt of their CPP retirement benefit past age 65). Implementation of this phase will start in November 2016.
The amendments define eligibility “proxies” that enable the Minister to presume that the eligibility criteria for a full pension (i.e. the 40 years residence requirement, the legal status, and the age criteria) are met when the individual is approved for the OAS pension at age 65.
Individuals who will be selected in this second phase are not in receipt of CPP or QPP benefits; therefore, they do not have an established payment relationship with the Department. For that reason, the amendments create a new strengthened residence “proxy.” The amendments permit these individuals to benefit from the presumption of residence under automatic enrolment, provided that the person, at age 64, has 40 years of participation in the CPP or QPP; however, each year of CPP or QPP participation must correspond with a valid domestic tax return filed with the Government of Canada. In addition, the Minister will require that the person’s latest possible tax return has been filed as a resident of Canada with the Canada Revenue Agency (CRA). (see footnote 5)
Given that tax filing information is not available prior to 1972, a transitional period, from 2016 to 2019, is required until tax information is available to match all potential years of CPP and QPP participation with a year of tax filing. To that end, the transitional provision stipulates that no evidence of tax filing is required for the years 1969, 1970 and 1971. For those years, CPP or QPP participation alone is sufficient.
Similar to Category 1 individuals, Category 2 individuals will be presumed at age 64 (in the absence of any evidence to the contrary) to have met the legal status requirement if they have a current address in Canada, and have met the new residence proxy outlined above.
The “One-for-One” Rule does not apply, as there is no change in administrative costs for business.
Small business lens
The small business lens does not apply, as there are no costs imposed on small business.
The amendments to the OAS Act to allow for automatic enrolment for OAS benefits were included in the Jobs, Growth and Long-term Prosperity Act, which received royal assent on June 29, 2012, and were discussed at the House of Commons Standing Committee on Finance, as well as at the Senate Standing Committee on National Finance.
Given that the amendments to enable Phase 2 are an expansion of the automatic enrolment initiative, and because of the consequential and technical nature of the amendments, no additional consultations were deemed necessary.
The amendments were prepublished in the Canada Gazette, Part I on June 25, 2016, for a 30-day comment period. No comments were received.
These regulatory amendments will have a beneficial impact on many Canadian seniors (Category 2 individuals) by eliminating the requirement for these seniors to submit an application for the OAS pension. It is estimated that this second phase of proactive enrolment will enable an additional 11% of new pensioners to be approved for a full OAS pension through automatic enrolment. This means that by the time the second phase of proactive enrolment is implemented, over 55% of new pensioners will be automatically enrolled for the OAS pension.
The regulatory amendments will also lead to administrative efficiencies and offset projected operational pressures for the Department in the administration of the OAS program. The estimated cost savings for the Department stemming from the automatic enrolment of Category 2 individuals total $800,000 for the first three years (from 2016–2017 to 2018–2019). After the first three years, estimated savings will be between $300,000 and $350,000 per year on an ongoing basis. These savings stem from the fact that Service Canada officers will no longer need to process or handle mailed-in applications for these clients.
Implementation, enforcement and service standards
To implement automatic enrolment for Category 2 individuals, Service Canada has been developing system changes, policies and procedures for implementation in November 2016, at a total cost of $5.8 million from 2015–2016 to 2016–2017.
Systems and procedures designed for automatic enrolment will ensure the accurate assessment of eligibility for the OAS pension. Upon implementation of the Regulations, Service Canada will include automatic enrolment for Category 2 individuals as part of its regular quality monitoring and review processes.
Old Age Security Policy
Income Security and Social Development Branch
Employment and Social Development Canada
140 Promenade du Portage, Phase IV, 8th Floor
- Footnote a
S.C. 2012, c. 19, s. 237
- Footnote b
R.S., c. O-9
- Footnote 1
C.R.C., c. 1246
- Footnote 2
Unless an individual is automatically enrolled, the OAS Act requires that individual to submit an application for OAS benefits. Applications are required to provide information necessary to determine eligibility. Evidentiary documents may also be required to substantiate the eligibility criteria.
- Footnote 3
- Footnote 4
Participation means any combination of years of valid CPP or QPP contributions, or years in receipt of a CPP or QPP retirement pension or disability benefit, or years where the child-rearing provision was applied to the contributory period.
- Footnote 5
A flat text file will be created by Service Canada in the Information Technology Renewal Delivery System of those individuals that currently have 40 years or more of CPP or QPP participation. This file will be sent to CRA to obtain their tax filing information.