Canada Gazette, Part I, Volume 146, Number 48: Regulations Amending the Old Age Security Regulations

December 1, 2012

Statutory authority

Old Age Security Act

Sponsoring department

Department of Human Resources and Skills Development

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Background

The objective of the Old Age Security (OAS) program is to ensure a minimum income for seniors and help reduce the incidence of low income among Canada’s seniors. OAS benefits include the basic pension, which is paid to all individuals aged 65 and older who meet the 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 spouse or common-law partner 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 on a pay-as-you-go basis, which means that there is no reserve. As a result, benefits for one generation are paid largely from the tax contributions of younger generations.

The OAS program was put in place at a time when Canadians were not living the longer, healthier lives that they are now. For example, life expectancy in 1970 was age 69 for men and 76 for women. Today, it is 79 for men and 83 for women. Canada’s population is also aging. By 2030, seniors will represent 23% of the population, compared to 14% in 2011. Future generations will feel the burden since almost the same number of workers will pay for twice as many retirees. In the 1970s, there were seven working age individuals for every person over 65 years of age. There are currently four working age individuals per senior and in 20 years there will only be two.

According to the Chief Actuary, the number of OAS beneficiaries will increase from 4.9 million in 2011 to approximately 9.3 million seniors in 2030 if no changes are made. Furthermore, the cost of the OAS program will grow from $38 billion in 2011 to $108 billion in 2030. Today, 13 cents of every federal tax dollar is spent on OAS benefits. If no changes are made, by 2030, this spending is projected to increase to 21 cents.

The growing number of seniors will also lead to a significant increase in the workload of processing benefit applications and maintaining accurate and timely benefit payments. In the next three years, the OAS client base will increase by 14.8%. By 2014–2015, approximately 5.7 million Canadians will receive OAS benefits, compared to 4.9 million in 2010–2011.

To improve service, produce administrative efficiencies and ensure that the OAS program remains sustainable for future generations, Budget 2012 introduced three changes to the OAS program. The following legislative amendments were included in the Jobs, Growth and Long-term Prosperity Act, which received Royal Assent on June 29, 2012:

  • Increase in the age of eligibility — The Old Age Security Act was amended to gradually increase the age of eligibility for the OAS pension and the GIS from age 65 to age 67 and for the Allowances from age 60 to age 62, starting in April 2023.
  • Voluntary deferral — The Old Age Security Act was amended to allow individuals to voluntarily defer their OAS pension up to the age of 70, in exchange for a higher, actuarially adjusted pension. Effective July 1, 2013, the OAS pension will be increased by a factor of 0.6% for each month a person defers receipt of their OAS pension, up to the age of 70. The amendments to the Old Age Security Act will also gradually increase the age limit for the voluntary deferral from age 70 to 72, consistent with the increase to the age of eligibility, starting in April 2028 (five years after the age of eligibility will start to increase).
  • Automatic enrolment — The Old Age Security Act was amended to provide the Minister with the discretion to waive the requirement for an application for the OAS pension and the GIS at age 65, and for the Allowances at age 60, when the Minister is satisfied that, on the basis of the information obtained under the Old Age Security Act, the individual meets the eligibility requirements for this pension. The legislation also allows the Minister to presume, in the absence of any evidence to the contrary, that a person has met the residence and legal status requirements.

In situations when there is insufficient information for the Minister to assess eligibility, the requirement to submit an application for the OAS pension will still apply.

The legislation also requires that the Minister inform the individual, in writing, of the information that will be used by the Minister to presume legal status and residence. In turn, before reaching the age 65, the individual is required to correct any inaccuracies regarding the information on which the Minister intends to rely to approve the payment of a pension.

The legislation stipulates that, should an individual wish to decline the waiver of the application, they must do so in writing before their 65th birthday. At any time before the individual reaches age 65, the Minister can cancel the waiver of the requirement of an application and require that the individual submit an application. The individual must be notified of this in writing.

The legislation allows the Minister to cancel a pension after the commencement of payment. Where an individual has cancelled their pension, the amount of any pension received must be repaid and the pension will be deemed not to have been paid. This will allow individuals to accumulate additional time towards an increase in their OAS pension, to a maximum of 40 years, or to take advantage of the voluntary deferral option.

Finally, the changes to the Old Age Security Act also enable the Minister to use personal information from the Minister of National Revenue or the Minister of Citizenship, Immigration and Multiculturalism.

While the legislative amendments pertaining to increasing the age of eligibility came into force on Royal Assent, the amendments related to voluntary deferral will come into force on July 1, 2013, and the amendments related to automatic enrolment for an OAS pension are anticipated to be brought into force in March 2013.

Issues and objectives

The Old Age Security Regulations (OAS Regulations) need to be amended in order to ensure consistency with the recent changes to the Old Age Security Act.

The objective of the proposed regulatory amendments is to support the legislative amendments to the Old Age Security Act, which were made to relieve fiscal and administrative pressures on the OAS program related to the aging population, while ensuring that the program continues to meet the changing expectations of seniors.

The proposed regulatory amendments will support the legislative amendments by ensuring that the OAS Regulations are consistent with the recent amendments to the Old Age Security Act. The proposed regulatory amendments will also provide technical specifications on how certain legislative amendments will be implemented.

Description

Age of eligibility

There are currently three provisions in the OAS Regulations where the age of eligibility for OAS benefits is specified to be either 65, for the OAS pension, or 60, for the Allowances. These regulations specify when the Minister may

  • apply the retroactivity provision (see footnote 1) for an OAS pension (65)
    [subsection 5(2)];
  • apply the retroactivity provision for an Allowance or an Allowance for the survivor (60) [subsection 12(2)]; and
  • convert an Allowance recipient to the OAS pension and the GIS (if applicable) [subsection 5(3)].

The proposed amendment to the OAS Regulations incorporates a reference to the age tables under section 2.2 of the Old Age Security Act, which show the changes in the age of eligibility for the Allowances and the OAS pension, from 60 to 62 and 65 to 67, respectively.

Voluntary deferral

Section 7 and section 8 of the OAS Regulations outline the manner in which a monthly pension is rounded to the nearest cent. The proposed amendments would ensure that the amount of a monthly deferred pension is rounded in a manner that is consistent with the rounding of a monthly pension for individuals who do not defer their OAS pension. To do so would require a small amendment to section 7 and section 8 of the OAS Regulations so that a deferred pension can be rounded to the nearest cent.

Automatic enrolment

Currently, individuals who wish to receive OAS benefits must fill out an application. The OAS program does not automatically enrol individuals for the OAS pension.

The proposed regulatory amendments would put into effect the first phase of the automatic enrolment initiative for the OAS pension. In particular, the amendments would list the data that allows the Minister to waive the requirement for an OAS pension application for individuals who are 65 years of age. These data include current Canadian home address; 40 years of Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) participation; (see footnote 2) and receipt of or approval for payment of a CPP/QPP retirement or disability pension.

The proposed amendments would allow the Minister to presume (in the absence of evidence to the contrary) that an individual has at least 40 years of residence in Canada, and meets the legal status requirements to receive a full OAS pension, based on the information listed above.

In order to determine an individual’s residence in Canada, the OAS Regulations currently require applicants to provide a statement of their residence in Canada, including any absences. The regulatory amendments would ensure that, when an application has been waived or deemed to have been made, an individual would not be required to provide a statement of residence. The Minister would reserve the right to request this statement at a later date, if necessary.

The proposed Regulations would also specify the effective date of approval for a waived OAS pension application to be the day the individual attains the age of 65 (this will increase in line with the increase in the age of eligibility starting in April 2023).

Finally, the OAS Regulations would specify that when an individual requests that a pension be cancelled, the individual must repay any benefits they have received to date within six months from the date the department granted the cancellation.

Consultation

The changes to the OAS program were announced in Budget 2012 and have elicited significant public reaction. The amendments to the Old Age Security Act were included in the Jobs, Growth and Long-term Prosperity Act, and were discussed at length by the House of Commons Standing Committee on Finance, as well as by the Senate Standing Committee on National Finance.

No comments from the public have been solicited or received on the proposed regulatory amendments. Because of the consequential and technical nature of these amendments, no consultations were deemed necessary.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to this proposal as there are no costs to small business.

Rationale

Age of eligibility

Amending the OAS Regulations as proposed would ensure consistency between the OAS Regulations and the Old Age Security Act, as it relates to the age of eligibility for OAS benefits, thereby ensuring the smooth administration of the OAS program.

The proposed amendments to the OAS Regulations with respect to the increase in the age of eligibility would not equate incremental costs or benefits as they are simply ensuring alignment with the legislative changes.

Voluntary deferral

The proposed amendments are technical in nature and would simply ensure that a monthly deferred pension is rounded to the nearest cent, in a manner that is consistent with pensions that are not deferred.

Automatic enrolment

In combination with the legislative changes to the Old Age Security Act, the regulatory changes for the first phase of automatic enrolment would have a beneficial impact on many Canadian seniors by removing the burden of applying for the OAS pension.

The proposed regulatory amendments would lead to administrative efficiencies and offset projected operational pressures.

Implementation, enforcement and service standards

To implement the first phase of automatic enrolment, Service Canada has been developing system changes, policies and procedures for anticipated implementation in 2013.

Systems and procedures designed for automatic enrolment will ensure the accurate assessment of eligibility for the OAS pension. Service Canada’s quality monitoring and review processes will be adapted to account for automatic enrolment.

Contacts

Nathalie Martel
Director
Old Age Security Policy
Income Security and Social Development Branch
Human Resources and Skills Development Canada
355 North River Road
Place Vanier, Tower B, 18th Floor
Ottawa, Ontario
K1A 0L1
Telephone: 613-957-1642
Fax: 613-991-9119
Email: nathalie.martel@hrsdc-rhdcc.gc.ca

Annette Vermaeten
Director
Special Projects
Income Security and Social Development Branch
Human Resources and Skills Development Canada
355 North River Road
Place Vanier, Tower B, 14th Floor
Ottawa, Ontario
K1A 0L1
Telephone: 613-952-9009
Fax: 613-946-4681
Email: annette.vermaeten@hrsdc-rhdcc.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to section 34 (see footnote a) of the Old Age Security Act (see footnote b), proposes to make the annexed Regulations Amending the Old Age Security Regulations.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice, and be addressed to Nathalie Martel, Director, Old Age Security Policy, Department of Human Resources and Skills Development, Place Vanier, Tower B, 18th Floor, 355 North River Road, Ottawa, Ontario K1A 0L1 (tel.: 613-957-1642; fax: 613-991-9119; email: nathalie.martel@hrsdc-rhdcc.gc.ca).

Ottawa, November 22, 2012

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE OLD AGE SECURITY REGULATIONS

AMENDMENTS

1. Section 2 of the Old Age Security Regulations (see footnote 3) is amended by adding the following after subsection (1):

(1.1) In these Regulations,

  • (a) a reference to the age of “60 years” is to be read for the applicable period set out in column 1 of the table to subsection 2.2(1) of the Act as a reference to the corresponding age in column 2; and
  • (b) a reference to the age of “65 years” is to be read for the applicable period set out in column 1 of the table to subsection 2.2(2) of the Act as a reference to the corresponding age in column 2.

2. Section 5 of the Regulations is amended by adding the following after subsection (3):

(4) If the Minister waives the requirement for an application in respect of a person under subsection 5(4) of the Act, the Minister’s approval is effective on the day on which the person attains the age of 65 years.

3. The portion of section 7 of the Regulations before paragraph (a) is replaced by the following:

7. Where the amount of a partial monthly pension referred to in subsection 3(3) of the Act, as increased under subsection 7.1(2) of the Act if applicable, contains a fraction of a dollar that is represented by three or more digits,

4. The portion of subsection 8(2) of the Regulations before paragraph (a) is replaced by the following:

(2) Where the product referred to in subparagraph (1)(a)(i), as increased under subsection 7.1(1) of the Act if applicable, or the product referred to in subparagraph (1)(a)(ii), contains a fraction of a dollar that is represented by three or more digits,

5. Section 20 of the Regulations is replaced by the following:

20. (1) To enable the Minister to determine a person’s eligibility in respect of residence in Canada, the person or someone acting on the person’s behalf shall provide a statement giving full particulars of all periods of residence in Canada and of all absences from Canada that are relevant to that eligibility.

(2) Unless the Minister requires otherwise under the Act, a person is not required to provide a statement under subsection (1) in the circumstances set out in subsection 5(2) or (5), 11(3) or (4), 19(4.1) or 21(5) or (5.1) of the Act.

6. Section 21 of the Regulations is amended by adding the following after subsection (7):

(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 information indicating that the person, for at least 40 years, for all or part of each of those years,

  • (a) 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, R.S.Q., c. R-9 that were above the person’s personal exemption for that year;
  • (b) received a retirement pension or disability pension under either the Canada Pension Plan or An Act respecting the Québec Pension Plan, R.S.Q., c. R-9; or
  • (c) 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, R.S.Q., c. R-9 because the person was a recipient of family benefits.

(9) For the purposes of subsection (8),

  • (a) in relation to the Canada Pension Plan, “basic exemption”, “contributory period” and “unadjusted pensionable earnings” have the same meaning as in subsection 2(1) of that Act and “family allowance recipient” has the same meaning as in subsection 42(1) of that Act; and
  • (b) in relation to An Act respecting the Québec Pension Plan, R.S.Q., c. R-9, “recipient of family benefits”, “personal exemption”, “unadjusted pensionable earnings” and “contributory period” have the same meaning as in paragraph 1(v) and sections 43, 98 and 101 of that Act respectively.

7. The Regulations are amended by adding the following after section 21:

LEGAL RESIDENCE

8. Section 22 of the Regulations is renumbered as subsection 22(1) and is amended by adding the following:

(2) For the purposes of section 4.1 of the Act as it relates to the requirement of paragraph 4(1)(a) of the Act, the prescribed information is both

  • (a) a current residential address in Canada; and
  • (b) the prescribed information that is referred to in subsection 21(8).

9. The Regulations are amended by adding the following after section 26:

CANCELLATION OF PENSION

26.1 (1) For the purposes of subsection 9.3(1) of the Act, a request for cancellation of a pension shall be made to the Minister in writing no later than six months after the day on which payment of the pension begins.

(2) For the purposes of subsection 9.3(2) of the Act, the amount of any pension and related supplement or allowance shall be repaid no later than six months after the day on which the request is granted.

COMING INTO FORCE

10. (1) Section 1 comes into force on the day on which these Regulations are registered.

(2) Sections 2 and 5 to 9 come into force on the day on which sections 449, 450 and 453 of the Jobs, Growth and Long-term Prosperity Act, chapter 19 of the Statutes of Canada, 2012, come into force, but if these Regulations are registered after that day, those sections come into force on the day on which these Regulations are registered.

(3) Sections 3 and 4 come into force on July 1, 2013, but if these Regulations are registered after that day, those sections come into force on the day on which these Regulations are registered.

[48-1-o]