Chan v. Canada (Employment, Workforce Development and Official Languages)

Chan v. Canada (Employment, Workforce Development and Official Languages)
Court (s) Database
Tax Court of Canada Judgments
Date
2024-06-17
Neutral citation
2024 TCC 83
File numbers
2023-1297(OAS)
Judges and Taxing Officers
John Yuan
Subjects
Old Age Security Act
Decision Content
Docket: 2023-1297(OAS)
BETWEEN:
EDDIES L.K. CHAN,
Appellant,
and
THE MINISTER OF EMPLOYMENT, WORKFORCE
DEVELOPMENT AND OFFICIAL LANGUAGES,
Respondent.
Reference heard on March 13, 2024 at Toronto, Ontario
Before: The Honourable Justice John C. Yuan
Appearances:
Agent for the Appellant:
Ivan Wong
Counsel for the Respondent:
Audrey Turcotte
JUDGMENT
In accordance with the attached Reasons for Judgment this Court makes the following findings with respect to the Appellant’s income or income from a particular source (or sources) insofar as they relate to the Appellant’s appeal of the Minister’s decision under section 27.1 of the Old Age Security Act (“OAS Act”) on the following basis:
1. For purposes of section 14 of the OAS Act, the Appellant is not required to include his 2018 or 2019 lump sum withdrawals from his RRIF in computing his estimated income under subsection 14(2), or paragraphs 14(5)(a) and (b), and that his estimated income under those provisions are $6,160.00 of 2018 estimated income under subsection 14(2), $90.00 of 2018 estimated income under paragraph 14(5)(b), and $162.84 of 2019 estimated income under paragraph 14(5)(a);
2. For purposes of sections 12 and 12.1 of the OAS Act, the Appellant’s incomes for the base calendar years are, as follows: (i) for months in the payment period June 2017 to July 2018, income for the base calendar year is the $56,909.00 income for the 2016 calendar year, (ii) for months in the payment period June 2018 to July 2019, income for the base calendar year is the $42,394.00 income for the 2017 calendar year, and (iii) for months in the payment period July 2019 to June 2020, income for the base calendar year is the $4,117.84 income for the 2018 calendar year; and
3. For purposes of section 18 of the OAS Act, the Appellant’s “actual income” is, as follows: (i) in relation to the GIS benefits paid pursuant to an estimate of income for the 2018 calendar year under subsection 14(2), actual income is $4,117.84 income for the 2018 calendar year, (ii) in relation to the GIS benefits paid pursuant to an estimate of income for the 2018 calendar year made under paragraph 14(5)(b), actual income is $4,117.84 income for the 2018 calendar year, and (iii) in relation to the GIS benefits paid pursuant to an estimate of income for the 2019 calendar year made under paragraph 14(5)(a), actual income is $3.00 income for the 2019 calendar year.
In accordance with Section 45 of the Old Age Security Regulations, there will be no award as to costs.
Signed at Toronto, Ontario, this 6th day of June 2024.
“John C. Yuan”
Yuan J.
Citation: 2024 TCC 83
Date: 20240606
Docket: 2023-1297(OAS)
BETWEEN:
EDDIES L.K. CHAN,
Appellant,
and
THE MINISTER OF EMPLOYMENT, WORKFORCE
DEVELOPMENT AND OFFICIAL LANGUAGES,
Respondent.
AMENDED REASONS FOR JUDGMENT
Yuan J.
[1] The Appellant, Mr. Chan, appealed to the Social Security Tribunal (“SST”) pursuant to subsection 28(1) of the Old Age Security Act (“OAS Act”) from a March 2, 2022 reconsideration decision of the Minister of Employment and Social Development (predecessor to the Respondent). The reconsideration decision responds to the Appellant’s request under section 27.1 of the OAS Act for the Minister to reconsider the determination reflected in a letter to the Appellant dated January 28, 2020.
[2] The Minister’s January 28, 2020 letter concerned the Appellant’s entitlement to monthly guaranteed income supplement (“GIS”) benefits for months within three twelve-month periods – namely, July 1, 2017 to June 30 2018, July 1, 2018 to June 30, 2019, and July 1, 2019 to June 30, 2020 – having regard for the Appellant’s retirement from employment with Carstar Markham on January 19, 2018. The Minister’s reconsideration decision confirmed the position reflected in the Minister’s January 28, 2020 letter.
[3] Since one of the grounds (and, in fact, the only ground) of the Appellant’s appeal to the SST was the correctness of the Minister’s determination of the Appellant’s income or the Appellant’s sources of income for months occurring in the three periods, the SST was required by subsection 28(2) of the OAS Act to initiate a reference to this Court for a decision.
[4] What follows are the Court’s reasons for decision on the matters associated with the Appellant’s appeal that subsection 28(2) of the OAS Act required the SST to refer to this Court.
I. BACKGROUND
[5] The GIS is a monthly non-taxable, monetary supplement that can be received by Canadian-resident individuals who receive Old Age Security pension and have low annual incomes.
[6] Conceptually, the OAS Act targets the GIS towards low-income individuals by (i) looking at the annual income earned in a recent calendar year, (ii) expressing the income from the prior year as a monthly amount by dividing it by twelve, and (iii) then clawing back the GIS amount payable for a month by one dollar for every two or four dollars of the individual’s monthly income from the prior year, depending on whether the portion of the person’s GIS monthly entitlement is being computed under section 12 or 12.1 of the OAS Act.
[7] An individual’s GIS entitlement is normally income-tested using his or her income from the full calendar year that precedes the twelve-month period beginning on July 1 of a year that includes the particular month. In the OAS Act, the twelve month period that begins on July 1 of a year and ends on June 30 of the following year is defined as a “payment period” and the calendar year that immediately precedes a payment period is regarded as the “base calendar year” in relation that payment period. So, on this basis, an individual’s GIS entitlement is normally income-tested using the person’s annual income for a calendar year that ended between six and 18 months before the month for which his or her GIS entitlement is being computed.
[8] However, once an individual reaches retirement age and ceases working or carrying on a business, the GIS regime recognizes that it would be inappropriate to have post-retirement GIS benefits income-tested using annual income that was earned in a year throughout which the individual was working. Consequently, the GIS regime has always included special rules that changed the way the claw back is computed for persons who retire, so that the income-testing is based on their reduced monthly income as a retiree. While these special rules initially contemplated only retirement scenarios, they were expanded to include situations where a person would be receiving less pension income than he or she was enjoying in prior years. These special rules are often described as the “option method”, even though they are not described as such in the OAS Act.
[9] As far as the Appellant and the Minister are concerned, their appeal is about the application of the option method regime as a consequence of the Appellant’s retirement from employment on January 19, 2018 and, more particularly, the extent to which the Appellant’s post-retirement lump sum withdrawals from a registered retirement income fund affected his GIS entitlements for payment periods covered by the applicable option method rules in the GIS regime.
II. THE OPTION METHOD
[10] As mentioned earlier, the claw back to a person’s monthly GIS entitlement is based on the individual’s income for the relevant base calendar year. By virtue of the definition of “income of a person for a calendar year” in section 2 of the OAS Act, that income is computed in accordance with the rules for calculating the income of individuals under the Income Tax Act (Canada) (“ITA”) subject to certain express modifications.
[11] The OAS Act contemplates that, in the usual case (i.e., situations not covered by the option method), an individual would make a new GIS application for each twelve-month payment period and such application would include a statement of the individual’s income for the base calendar year in relation to that period. However, as a practical matter, GIS applicants do not submit a statement of income for the base calendar year with their application because income information for the relevant base calendar year is usually available to the Minister before the start of the particular payment period through the applicant’s tax filings with the Canada Revenue Agency.
[12] Subsections 14(1) and (1.01) are the provisions of the OAS Act that establish the requirement for a GIS applicant to file a statement of income for the base calendar year and the Minister’s authority to waive this requirement where the information is already available to the Minister. And, subsections 14(1.1) and (1.2) of the OAS Act allow the Minister to estimate a person’s income for a base calendar year where the Minister has waived the requirement that the person make a GIS application under subsection 11(3.1) or (4).
[13] The remaining parts of section 14 of the OAS Act, namely subsections 14(2) to (7), comprise the rules for the option method. Subsections 14(2), (3), and (5) cover situations where an individual has retired from an office or employment or ceased to carry on a business. Subsections 14(4) and (6) cover situations where an individual has stopped receiving income from a pension that was previously providing income. Subsection 14(7) ensures that a person does not receive GIS monthly benefits based on the income computed pursuant to an option method rule before the month that follows the start of retirement from employment or business or reduction of pension income, as the case may be.
[14] Each of subsections 14(2) to (6) contemplates that the individual who wants the option method applied would provide an estimate of annual income and the Minister would pay GIS benefits for the relevant period with the claw back based on the estimated income thus calculated rather than the annual income for the base calendar year for that payment period.
[15] There are multiple option method rules for computing estimated income for a payment period because the reduction to an individual’s income due to retirement or reduction/loss of pension income would normally not have an impact on the GIS claw back for a month until the year of retirement or reduction/loss of pension income becomes the base calendar year for the payment period in which the month occurs. Having several estimated income formula under the option method addresses the fact that there is a lag of two or more twelve-month payment periods between (i) the year of retirement or reduction/loss of pension income, and (ii) the start of the first payment period that uses the year of retirement or reduction/loss of pension income as its base calendar year.
III. APPELLANT’S RETIREMENT: ESTIMATED INCOME
[16] The Appellant retired from employment with Carstar Markham on January 19, 2018.
[17] The Appellant was eligible under Section 14 of the OAS Act to elect to have the Minister apply three rules under the option method by virtue of his retirement. Each rule applied to a different payment period and allowed the Appellant to provide a statement of estimated income to determine his post-retirement GIS entitlement for the period.
Subsection 14(2) – Retirement During Payment Period
[18] First, subsection 14(2) of the OAS Act allowed the Appellant to provide a statement of estimated income for the 2018 calendar year for use in determining his GIS entitlement for the July 1, 2017 to June 30, 2018 payment period in which he retired from Carstar Markham, which payment period has the 2016 calendar year as its base calendar year. (Subsection 14(7) applied to ensure that the Appellant only received monthly GIS payments based on estimated income computed in accordance with this rule for the five months in the payment period after his January 19, 2018 retirement.)
[19] Subsection 14(2) required the Appellant’s estimated income for the year to include (i) any pension income received between February 1, 2018 to December 31, 2018 divided by 11 and multiplied by 12, (ii) income from any business or income from any office or employment received in 2018 other than his employment with Carstar Markham, and (iii) his income from the 2016 base calendar year but excluding all pension income, any income from a business, and any income from an office or employment.
Paragraph 14(5)(b) – Retirement in Prior Payment Period
[20] Next, paragraph 14(5)(b) of the OAS Act allowed the Appellant to provide a statement of estimated income for the 2018 calendar year for use in determining his GIS entitlement for the July 1, 2018 to June 30, 2019 payment period, which is the payment period that followed the one in which he retired from Carstar Markham. The July 1, 2018 to June 30, 2019 payment period has the 2017 calendar year as its base calendar year.
[21] Paragraph 14(5)(b) required the Appellant’s statement of estimated income for the year to include (i) any pension income received between February 1, 2018 to December 31, 2018 divided by 11 and multiplied by 12, (ii) any business income or income from an office or employment received in 2018 other than income from his employment from Carstar Markham, and (iii) his income from the 2017 base calendar year but excluding all pension income, any income from a business, and any income from an office or employment.
Paragraph 14(5)(a) – First Payment Period Starting After Year of Retirement
[22] Finally, paragraph 14(5)(a) of the OAS Act allowed the Appellant to provide a statement of estimated income for the 2019 calendar year for use in determining his GIS entitlement for the July 1, 2019 to June 30, 2020 payment period, which is the payment period that began after the end of the 2018 calendar year in which he retired from Carstar Markham. The July 1, 2019 to June 30, 2020 payment period has the 2018 calendar year as its base calendar year which, in the Appellant’s case, includes January 2018 employment earnings for the stub period prior to his January 19, 2018 retirement.
[23] Paragraph 14(5)(a) required the Appellant’s statement of estimated income for the year to include (i) any pension income received in 2019, (ii) any business income or income from an office or employment received in 2019 other than income from his employment with Carstar Markham, and (iii) his income from the 2018 base calendar year but excluding all pension income, any income from a business, and any income from an office or employment.
Pension Income
[24] As should be evident from the above descriptions of the components for estimated income, pension income received during the relevant calendar year is to be included under each computation.
[25] Section 14 of the Old Age Security Regulations (“OAS Regulations”) defines the meaning of the expression “pension income” when used in section 14 of the OAS Act, as follows:
Definition of Pension Income
14. For the purposes of section 14 of the Act, “pension income” means the aggregate of amounts received as
(a) annuity payments;
(b) alimony and maintenance payments;
(c) employment insurance benefits;
(d) disability benefits deriving from a private insurance plan;
(e) any benefit, other than a death benefit, under the Canada Pension Plan or a provincial pension plan as defined in the Canada Pension Plan;
(f) superannuation or pension payments, other than a benefit received pursuant to the Act or any similar payment received pursuant to a law of a provincial legislature;
(g) compensation under a federal or provincial employee’s or worker’s compensation law in respect of any injury, disability or death;
(h) income assistance benefits under a formal agreement referred to in subsection 33(1) of the Department of Human Resources Development Act by reason of a permanent reduction in the work force as described in that subsection; and
(i) income assistance benefits under the Plant Workers’ Adjustment Program, the Fisheries Early Retirement Program or the Northern Cod Adjustment and Recovery Program by reason of permanent reduction of the workforce.
[26] The foregoing language establishes an exhaustive (rather than inclusive) definition for “pension income” when applying the option method rules in section 14 of the OAS Act. Also, since the text of Section 14 does not use the expression “or similar payment” as an add-on to any of the enumerated payment types, a payment cannot be included as pension income simply because it shared some characteristics with the expressly enumerated payment types.[1]
IV. THE PARTIES’ POSITIONS
[27] The dispute between the Appellant and the Minister concerns the treatment of discretionary amounts that the Appellant withdrew from his registered retirement income fund (RRIF) after his January 19, 2018 retirement from Carstar Markham – the Appellant made lump sum withdrawals from his RRIF of $7,200.84 in 2018 and $7,684.00 in 2019 – and whether such amounts are pension income for purposes of section 14 of the OAS Act and therefore within the scope of income that the option method rules required him to include when preparing his statements of estimated income.
[28] The Appellant submitted statements of estimated income for the 2018 calendar year to the Minister for purposes of computing his GIS entitlement under the option method for the period February 2018 to June 2018 (within the July 2017 to June 2018 payment period) and the July 2018 to June 2019 payment period. His statements of 2018 estimated income did not include an anticipated 2018 withdrawal of the $7,200.84 lump sum amount from his RRIF as pension income. The Minister initially accepted the Appellant’s statements of 2018 estimated income for purposes of computing his GIS entitlement for the two periods.
[29] The Appellant then submitted a statement of estimated income for the 2019 calendar year to the Minister in support of using the option method for purposes of computing his monthly GIS entitlement for the July 2019 to June 2020 payment period. His statement of 2019 estimated income did not include an anticipated 2019 withdrawal of the $7,684 lump sum amount from his RRIF as pension income.
[30] At some point, the Minister learned through the Appellant’s tax filings that he withdrew $7,200.84 as a lump sum from his RRIF in 2018. The Minister then made the determination that the Appellant’s estimated income for 2018 should have included the $7,200.84 payment from his RRIF for purposes of determining his monthly GIS entitlement for the seventeen-month period beginning February 2018 and ending June 2019.
[31] Based on the Appellant’s representation to the Minister that no RRIF payments would be received in 2019 and to be consistent with the Minister’s overall position that payments from the Appellant’s RRIF are pension income for purposes of the option method rules, the Minister appears to have a made a unilateral decision to apply the option method rule under subsection 14(6) of the OAS Act – available for situations where a person has suffered a loss/reduction of pension income from one year to the next – to make and use a statement of estimated income for the 2019 calendar year. However, after the Minister learned that the Appellant made a further $7,684.00 lump sum withdrawal from his RRIF in 2019, the Minister reversed position on the availability of the subsection 14(6) option method rule because the Minister was now aware that the Appellant’s RRIF payments continued into 2019. The Respondent advised at the hearing that the Minister currently takes the position that the Appellant’s GIS entitlement for the July 2019 to June 2020 payment period should be based on a statement of estimated income for the 2019 calendar year computed in accordance with the rules in paragraph 14(5)(a) of the OAS Act and the Appellant was ineligible to use the option method rules under subsection 14(6).
[32] Based on the parties’ oral submissions at the hearing and materials filed with the Court, the tables below reflect their respective positions on the required components for estimated income for purposes of determining monthly GIS entitlement for payment periods under the applicable option method rules that were available to the Appellant due to his January 19, 2018 retirement from Carstar Markham.
Subsection 14(2) – 2018 Estimated Income: July 2017 to June 2018 Payment Period
Appellant
Respondent
s. 14(2)(a) – any pension income received by the person in that part of that [2018] calendar year that is after the month in which the person ceases to hold that office or employment…divided by the number of months in that part of the calendar year and multiplied by 12
2018 CPP: $6,160.00
2018 RRIF lump sum: $7,200.84
2018 CPP: $6,160.00
s. 14(2)(b) – the income from any office or employment or any business for that [2018] calendar year other than income from the office, employment or business that has ceased
Nil
Nil
s. 14(2)(c) – the person’s income for the [2016] base calendar year calculated as though, for that year, the person had no income from any office or employment or any business and no pension income
Nil
Nil
Total 2018 Estimated Income
$6,160.00
$13,360.84
Paragraph 14(5)(b) – 2018 Estimated Income: July 2018 to June 2019 Payment Period
Appellant
Respondent
s.14(5)(b)(i) – any pension income received by the person in that part of that [2018] calendar year that is after the month in which the person ceases to hold that office of employment…divided by the number of months in that part of the calendar year and multiplied by 12
2018 CPP: $6,160.00
2018 RRIF lump sum: $7,200.84
2018 CPP: $6,160.00
s. 14(5)(b)(ii) – the income from any office or employment or any business for that [2018] calendar year other than income from the office, employment or business that has ceased
Nil
Nil
s. 14(5)(b)(iii) – the person’s income for the [2017] base calendar year calculated as though, for that year, the person had no income from any office or employment or any business and no pension income
2017 interest income: $12,987.00
2017 RRSP deduction: $(19,057.00)
2017 interest income: $12,987.00
2017 RRSP deduction: $(19,057.00)
Total 2018 Estimated Income
$90.00
$7,290.84
Paragraph 14(5)(a) – 2019 Estimated Income: July 2019 to June 2020 Payment Period
Appellant
Respondent
s. 14(5)(a)(i) – any pension income received by the person in that [2019] calendar year
2019 CPP: $6,302.00
2019 RRIF lump sum: $7,684.00
2019 CPP: $6,302.00
s. 14(5)(a)(ii) – the income from any office or employment or any business for that calendar year other than income from the office, employment or business that has ceased
Nil
Nil
s. 14(5)(a)(iii) – the person’s income for the [2018] base calendar year calculated as though, for that year, the person had no income from any office or employment or any business and no pension income
2018 RRIF lump sum: $7,200.84
2018 RRSP deduction: $(13,340.00)
2018 RRSP deduction: $(13,340.00)
Total 2019 Estimated Income
$162.84
$646.00
[33] These tables show how estimated income is impacted by the parties’ respective positions on whether a lump sum withdrawal from an RRIF is pension income under the option method rules. Since the Appellant’s position is that a lump sum RRIF withdrawal is not pension income, the only appearance of a lump sum RRIF withdrawal in the Appellant’s computations of estimated income above is the inclusion of the 2018 withdrawal as part of the income from the 2018 base calendar year under subparagraph 14(5)(a)(iii) when computing estimated income for the July 2019 to June 2020 payment period; the Respondent does not include the 2018 RRIF withdrawal among the items in subparagraph 14(5)(a)(iii) because the Minister’s position is that the Appellant’s lump sum RRIF withdrawal is pension income and the language in that subparagraph expressly excludes pension income from the 2018 base calendar year from the amounts to be included in 2019 estimated income.
[34] It is also to be noted that the Respondent’s positions on the amount to be included in estimated income for the 2018 calendar year pursuant to paragraph 14(2)(a) and subparagraph 14(5)(b)(i) in respect of the 2018 $2,700.84 lump sum payment do not conform with the express wording of those provisions; the words used in those two provisions clearly require that, in the Appellant’s case, any pension income received in 2018 after his retirement is to be divided by 11 months and then multiplied by 12. The Minister’s interpretation that the $7,200.84 lump sum payment is 2018 pension income would correspond to an income inclusion of $7,854.55 (= $7,200.84 x 12 / 11) in respect of that item. However, as will be discussed under the next heading, the fact that post-retirement pension income is to be pro-rated in this way under the rules in paragraph 14(2)(a) and subparagraph 14(5)(b)(i) is, in my view, instructive on the issue of whether the option method rules require a lump sum RRIF payment to be included as pension income.
V. TREATMENT OF LUMP SUM RRIF WITHDRAWALS
[35] There appears to have been only two prior reported decisions of this Court that have directly considered the question of whether a lump sum payment from an RRIF qualifies as “pension income” for purposes of the option method rules.[2]
[36] In Ward,[3] the appellant made a discretionary lump sum withdrawal from her RRIF in 2005, which was the base calendar year for the payment period under appeal. She wanted to have access to the option method rules and provide a statement of estimated income for 2006 – and thereby exclude the 2005 lump sum RRIF payment from the income that would be used to determine the claw back to her GIS entitlement – on the basis that she suffered a loss/reduction of pension income in 2006. The Court considered the Minister’s position that, as a category, payments from an RRIF are not pension payments under paragraph (f) of the “pension income” definition in section 14 of the OAS Regulations and then stated, “[w]hile these arguments have merit, they fall short of being compelling in my view.” The Court went on to assume (and counsel for the Minister appeared to concede) that the lump sum RRIF payments were pension income but the Court ultimately dismissed the appeal on the basis that, even assuming that the 2005 lump sum RRIF payment was pension income, the appellant did not suffer a loss/reduction of pension income in 2006 to allow her to use the option method for that year.
[37] In Lévesque,[4] the appellant retired from his employment in September 2011 and sought to have his GIS entitlement for the first six months of the July 2012 to June 2013 payment period determined on the basis of his post-retirement income situation, rather than his income from the 2011 base calendar year, which included pre-retirement employment income. In computing his estimated income for 2012, the Minister included a lump sum withdrawal made from a life income fund (which the Court found to be an arrangement that qualified as a RRIF under the ITA) on the basis that the payment was pension income pursuant to section 14 of the OAS Regulations. In the course of considering whether the lump sum payment could be an “annuity payment” (caught by paragraph (a) of the “pension income” definition) or a “superannuation or pension payment” (caught by paragraph (f) of the “pension income” definition), the Court stated the following [underlining added]:
[46] I recognize in certain cases, funds from an RRIF could be considered to be pension income. However, I disagree with the Respondent’s generalization. Whether or not something is a pension income within the meaning of the OAS Act is not determined by the financial vehicle; it is a question of law: do the funds in question constitute an annuity or pension payment? Section 14 of the Regulations was written in a restrictive and comprehensive manner; it was therefore Parliament’s intent to fully define what constitutes pension income within the meaning of section 14 of the OAS Act. For this reason, I believe that a generalization based on the nature of the financial vehicle is risky, even wrong.
[47] Indeed, as mentioned earlier, in order for funds to constitute an annuity or pension income for the purposes of section 14 of the Regulations, the funds must be paid on a recurring or regular basis. Therefore, if the taxpayer received $1,500 annually from an RRIF, it is my opinion that these funds would constitute an annuity or pension income within the law. However, if the same taxpayer withdrew $15,000 from the same RRIF within a particular taxation year, this withdrawal would not transform the funds into an annuity or pension within the meaning of section 14 of the Regulations, since the withdrawal is not and will never be made on a recurring or regular basis. It is therefore appropriate to consider each case as being unique rather than assuming that a specific financial vehicle will always produce an annuity or a pension.
[38] The Court went on to conclude that, in the appellant’s circumstances, the lump sum payment from his life income fund was not pension income for purposes of computing his 2012 estimated income under the option method.
[39] In this reference, the Respondent embraces the observation in Lévesque that a regular stream of annual payments from an RRIF would cause those payments to be pension income and urges me to apply that same reasoning here to find that the Appellant’s 2018 and 2019 lump sum RRIF withdrawals were both payments that constituted pension income within the meaning of section 14 of the OAS Regulations.
[40] Factually, the Respondent’s position is based on the notion that, to qualify as an RRIF under the provisions of the ITA and Income Tax Regulations,[5] the terms of an RRIF must provide for annual minimum withdrawals by the annuitant of a prescribed percentage of the fair market value of all properties held in connection with the fund at the end of the year, starting on the calendar year following the one in which the annuitant established the plan. The prescribed percentage begins at just over 5% of the value of the plan’s assets at the end of the year in which he or she turns age 71 and grows each year until topping out at 20% at age 95.
[41] At the hearing, the Appellant’s representative provided a helpful chart that showed the minimum mandatory amount that the Appellant was required to withdraw under the terms of his RRIF. The chart showed that the lump sum RRIF withdrawals that the Appellant made in 2018 and 2019 correspond to the minimum amount that he was required to receive from his RRIF by statute. The chart also showed that the Appellant continued to make only the minimum mandatory withdrawal from this RRIF in each subsequent year until the present. In short, the chart showed that the Appellant’s pattern of annual taxable receipts from his RRIF over the six-year period from 2018 was not totally dissimilar to what one might expect to see in a six-year window when a person is entitled to benefits under a typical employment-related pension plan.
[42] Having regard for the purpose underlying the option method regime – which is to allow an individual’s GIS entitlement to be recomputed for a year solely to take into account income reductions in that year due to retirement or a loss/reduction of previously enjoyed pension benefits – it is arguably consistent with that purpose to include the minimum amount that the individual is required to withdraw from the RRIF in the year in accordance with the plan terms when estimating income for the year of retirement or loss/reduction of pension income. However, for the reasons discussed below, I have concluded that the Appellant’s payments from his RRIF are not pension income, as defined in section 14 of the OAS Regulations.
Dictionary and Other Meanings of the Relevant Terms
[43] First, as this Court observed in Lévesque, the definition of “pension income” in section 14 of the OAS Regulations was written to be “restrictive and comprehensive.” As mentioned earlier, it is not enough that a payment shares common characteristics with one or more of the enumerated payment categories for the particular payment to be included in the scope of the “pension income” definition; rather, the payment must have all the indicia that one would expect to identify in an amount that is one of the enumerated “pension income” payment types.
[44] I note that, while pensions are arrangements that one normally associates with the receipt of benefits following retirement from employment, some of the enumerated payment types in section 14 of the OAS Regulations have nothing to do with employment or retirement whatsoever, such as alimony or maintenance payments or disability benefits and, in the case of annuity payments, there is nothing about an annuity contract that makes it inherently (or even typically) an arrangement that is associated with employment or retirement. This serves to emphasize the point that, for purposes of computing estimated income in section 14 of the OAS Act, the classes of payments that are “pension income” for purposes of section 14 of the OAS Act are entirely a creation of statute and, the question of whether a lump sum payment has the features of a pension is only relevant for determining whether the payment is, in fact, a “pension payment” within the meaning of paragraph (f) of the definition of “pension income”.
[45] With this framework in mind, there are only two payment categories described in section 14 of the OAS Regulations under which a lump sum withdrawal from an RRIF could possibly qualify: an annuity payment (paragraph 14(a)), and a superannuation or a pension payment (paragraph 14(f)).
(i) Paragraph 14(a) – Annuity Payments
[46] Starting with annuity payments, the term “annuity” is not defined in the OAS Regulations or the OAS Act. While “annuity” is among the definitions in subsection 248(1) of the ITA, the ITA does not purport to exhaustively define the term but rather ensures that its scope “includes an amount payable on a periodic basis payable at intervals longer or shorter than a year and whether payable under a contract, will or trust or otherwise.”
[47] However, a canvas of dictionary definitions for the term suggests that an annuity contemplates an arrangement under which periodic payments of a fixed amount are made to the recipient. For example, The Oxford Dictionary of English (3rd edition) defines an annuity as “a fixed sum of money paid to someone each year, typically for the rest of their life. a form or insurance or investment entitling the investor to a series of annual sums.” Similarly, Black’s Law Dictionary (11th edition) provides that an annuity is “[a]n obligation to pay a stated sum, usu. monthly or annually, to a stated recipient…A fixed sum of money payable periodically…A right often acquired under a life-insurance contract, to receive fixed payments periodically for a specific duration.”
[48] While the mandatory minimum withdrawal requirement under the terms of an RRIF might ensure that the plan’s owner (perhaps, ironically, a person that the ITA defines as the “annuitant”) will receive a stream of annual payments from the plan while there are still assets in the plan, the payment each year is not a fixed amount. Consequently, the mandatory minimum withdrawal requirements of an RRIF do not cause such arrangements to be an annuity and, accordingly, a payment from the RRIF is not within the scope of paragraph (a) of section 14 of the OAS Regulations.
(ii) Paragraph 14(f) – Superannuation or Pension Payments
[49] I now turn to superannuation or pension payments.
[50] Neither the OAS Act nor the OAS Regulations contain a definition for “superannuation”.
[51] There is no definition for “pension” in the OAS Regulations. Section 2 of the OAS Act defines pension as “a monthly pension authorized to be paid under Part I [of the OAS Act]” but, since this provision was obviously included to create a short form reference for pension payable under the OAS Act rather than establishing the scope of arrangements to be considered a pension for purposes of the OAS Act, the section 2 definition is of no assistance for present purposes.
[52] Dictionary definitions for “superannuation” suggest that the expression is a synonym for “pension”, or that it is a type of pension. For example, the Oxford Dictionary of English (3rd edition) defines superannuation as “regular payment made into a fund by an employee towards a future pension. a pension of this type paid to a retired person.”
[53] Dictionary definitions for “pension” are more descriptive and typically reflect the concept that pension benefits are paid upon retirement from working life and often with contributions from the government or a former employer. For example, the Oxford Dictionary of English (3rd edition) defines a pension as “[a] regular payment made by the state to the people of or above the official retirement age and to some widows and disabled people. A regular payment made during a person’s retirement from an investment fund to which that person or their employer has contributed during their working life.” Similarly, Black’s Law Dictionary (11th edition) provides that a pension is “[a] regular series of payments made to a person (or the person’ representatives or beneficiaries) for past services or some type of meritorious work done; esp,. such a series of payments made by the government… [a] fixed sum paid regularly to a person (or to the person’s beneficiaries), esp. by an employers as a retirement benefit.”
[54] The term “superannuation” is not defined in the ITA and, as discussed below, there is an ITA definition of “pension” whose use is restricted to subsection 118(1) of the ITA. Interestingly, the terms “superannuation” and “pension” appear together as part of a definition in subsection 248(1) of the ITA for “superannuation and pension benefit” but, like the definition for annuity in the ITA, this definition is not an exhaustive one and is directed at ensuring that its scope include not just benefits but any amount received out of such plans.
[55] In Abrahamson, 91 TCC 213, this Court had the opportunity to consider the scope of “superannuation or pension benefits” and whether the expression included an individual’s lump sum withdrawals from an individual retirement account (IRA) established under U.S. law.
[56] The IRA was a trusteed plan in which the taxpayer and his spouse were the only beneficiaries. It was the vehicle to which the taxpayer transferred his entitlements under a pension plan relating to his former employment in the United States prior to his relocation to Canada in 1975. The taxpayer withdrew a $85,126 lump sum amount from the IRA in 1986 and took the position that the amount was a distribution of capital from an inter vivos trust and, therefore, a non-taxable receipt under the ITA. The Minister reassessed the taxpayer on the basis that the lump sum payment from the IRA was a taxable receipt by virtue of being within the scope of “superannuation or pension benefits” in subparagraph 56(1)(a)(i) of the ITA.
[57] In the course of considering the ambit of “superannuation or pension benefits”, the Court canvassed the English and French dictionary definitions of both expressions and then stated the following [underlining added]:
[23] Hence, the words “superannuation or pension benefit”…contemplate a payment of a fixed or determinable allowance paid at regular intervals to a person usually, but not always, as a result of termination of employment for the purpose of providing the person with a minimum means of existence; the formal program for the payment of the specified benefits, or the way the benefits are to be carried out, must be organized or promoted by a person other than the beneficiary since the beneficiary’s right to receive the superannuat