REASONS
FOR JUDGMENT
Bocock J.
I. Introduction
[1]
Mr. McArthur brings this appeal because he was
denied a Guaranteed Income Supplement (known commonly as the GIS) for the
period of July 1, 2014 to June 30, 2015 (the “payment period”). The reason for
the Minister of Employment and Social Development’s (the “Minister”) denial was
the finding that Mr. McArthur withdrew or received $19,279.11 as a lump sum RSP
payment in the year 2013 (the “RSP payment”). That previous 2013 year is used
by the Minister as a base year to determine whether Mr. McArthur falls below an
income level warranting payment of the GIS for the subsequent payment period. The
Minister asserts the RSP payment pushed Mr. McArthur’s income above the maximum
threshold. Accordingly, the GIS was denied. The Minister’s decision involved a
determination of income. Therefore, the Social Security Tribunal, when Mr.
McArthur exercised his right of appeal, referred the matter to this Court
pursuant to the Old Age Security Act, R.S.C., 1985, c. O-9 (the “OAS
Act”).
[2]
At the hearing, it was clear to the Court that critical
documentation was missing: details of the nature of TD Wealth account number 65Y980S.
The Court heard Mr. McArthur’s testimony regarding other relevant issues, but
adjourned to allow him an opportunity to procure from an otherwise reticent
source financial institution the documentary history required concerning the
formation of the account. Quite amenably and logically, Respondent’s counsel
agreed. Both parties were afforded 90 days to provide the relevant
documentation and/or submissions. Based upon the testimony of Mr. McArthur, his
supplementary documents and the parties respective submissions, the Court now
renders its decision.
A. Issues
[3]
The critical issues before the Court are:
(i) what
was the nature of the determinative $19,279.11 payment received by Mr. McArthur
in the 2013 base year?
(ii) was
Mr. McArthur required to include that sum in the computation of his income for
GIS purposes?
B. Some Additional Facts
[4]
Mr. McArthur worked for Abitibi Consolidated
Limited and related pulp and paper companies for 35 years. At some point during
2003, Abitibi sought to remove itself as trustee and unwind the registered
pension plan for its retired pensioned employees. Transfers from that
registered pension plan to stand-alone locked-in accounts were effected. In Mr.
McArthur’s case, a lump sum amount of approximately $730,000.00 was transferred
from the registered pension plan into a locked-in retirement fund (“LIF”). In
2008, after certain unrelated further developments, approximately 25% of the then
LIF balance was transferred into an unconstrained or “unlocked” RSP, being the
relevant TD Wealth account 65Y980S. It is from this account that the alleged
determinative “RSP payment” was made to Mr. McArthur in 2013.
II. The
Law
a)
What is to be
included in the calculation of income for GIS
[5]
To appreciate the inclusion requirements
relating to computing income for GIS purposes, reference in needed to the OAS
Act and the Regulations thereunder. The rules for computing
income for such purposes are distinct from, but related to the Income Tax
Act, RSC 1985, c.1, as amended (the “ITA”).
[6]
Section 2 of the OAS Act defines a
pensioner’s income as determined under the ITA. The ITA, in turn,
in subsection 146(8) and paragraph 56(1)(h) provides for the inclusion of RSP
payments (withdrawals) where it is written:
146(8)
Benefits taxable
(8) There shall
be included in computing a taxpayer’s income for a taxation year the total of
all amounts received by the taxpayer in the year as benefits out of or under
registered retirement savings plans, other than excluded withdrawals (as
defined in subsection 146.01(1) or 146.02(1)) of the taxpayer and amounts that
are included under paragraph (12)(b) in computing the taxpayer’s income.
56(1)(h)
Registered
retirement savings plan, etc.
(h) amounts
required by section 146 in respect of a registered retirement savings plan or a
registered retirement income fund to be included in computing the taxpayer’s
income for the year;
[7]
The OAS Act further provides for certain
exclusions from computed income for GIS purposes. For such purposes “pension
income” is to be excluded from the income calculation solely for GIS purposes.
[8]
In turn, within section 14 of the OAS
Regulations, “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 an injury,
disability or death;
(h) income assistance benefits
under an 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 a
permanent reduction in the workforce.
[9]
To calculate one’s income for the purposes of the OAS
Act and specifically GIS one follows a prescribed route. The OAS
directs a taxpayer to the ITA. The ITA provides general guidance
regarding various inclusions from pension type payments. For GIS specifically,
one turns back to the OAS Act and Regulations. As stated above, specific
exclusions are allowed for GIS purposes including pension income, specifically
in the form of annuity payments (14 (a) above). The calculation of income for
GIS purposes is then made. If one exceeds the maximum allowable threshold, GIS
benefits are not paid.
b)
Mr. McArthur’s
position
[10]
Mr. McArthur asserts two bases as to why the RSP
payment is not a withdrawal of $19,279.11 from an RSP, but rather pension
income in the form of an annuity payment.
[11]
Firstly, he asserts he turned 71 on January 20,
2013. Therefore the RSP became a RIF or retirement income fund during the 2013
taxation year. Therefore, moneys received were not lump sum RSP payments, but
statutorily mandated pension income to be excluded from income for GIS purposes
under the OAS Act.
[12]
Secondly, the source of funds - - the TD Wealth
account number 65Y980S - - was originally a registered pension plan. Beneficiaries
were and are specifically permitted to “unlock” up to 25% of same by an
amendment to legislation. Of relevance, receiving funds directly in the form of
pension income from that registered pension fund as an annuity would not have
been included in income for the GIS calculation. Mr. McArthur therefore argues
that his receipt of funds from the pension plan’s successor RSP also should not
trigger inclusion. In short, Mr. McArthur argues that, the initial source,
namely a registered pension plan, provides a permanent shield from the
inclusion of later payments into income for GIS purposes, despite these
otherwise being in the form of lump sum withdrawals from an RSP.
III. Analysis
and Decision
a) what was the nature of the $19,279.11 payment in 2013?
[13]
The documentation relating to the TD Wealth
Account, the source of payment, is unambiguous: it is an RSP account. The
underlying monthly account statements and the generated T4 RSP (Statement of
RSP Income) clearly identify the investment, withdrawal and payment as an RSP
withdrawal as opposed to pension income as an annuity payment. Its historical
lineage from a registered pension plan is not distinguished in the legislation
and regulations. Paragraph 56(1)(h) of the ITA includes such payments as
income and subsection 146(8) declares such benefits to be included unless
excluded. Within the OAS Act itself, there is no further exclusion for an
RSP withdrawal, unlike pension income. Mr. McArthur’s situation does not
factually fall within the definition contained in paragraph 14(a) of the OAS
Regulations exclusions: such as pension income. All of this is true even
where the heritage of the RSP was initially intended to be an annuity, but was
converted by the pensioner, even at the urging of his former pension trustee,
to an RSP.
[14]
Additionally, there is no jurisprudence supporting
Mr. McArthur’s contention. This is consistent with the decisions of Justice
Webb at paragraph 8 of Gonder v. Human Resources, 2011 TCC 505,
itself referencing Justice Bowie in Drake v. Human Resources,
2005 TCC 498 at paragraphs 3 and 6.
[15]
Factually, the documentation provides a full answer
to Mr. McArthur’s assertion that the RSP payment became an annuity under a
Retirement Income Fund (RIF) upon his 71st birthday. The investment
description, statement and T4 RSP, on their face, do not reflect such a transformation.
It was a lump sum withdrawn from an RSP, not a converted periodic annuity paid
monthly over a statutorily mandated annuity term.
b) was Mr. McArthur required to include the $19,279.11 for GIS purposes?
[16]
The purpose behind the differentiation of treatment
for pension annuity payment and RSP withdrawal is neither readily identifiable
nor necessarily fair upon first glance. However, it is clear. Periodic, annuity
payments in the form of pension income need not be included for GIS income purposes,
but RSP withdrawals must be. The case law is also clear. Regrettably, so it the
Court’s answer: Mr. McArthur must include the $19,279.11 in the calculation of
income for GIS purposes in the 2013 base year because the RSP payment was
neither in the form of pension income nor another species of excluded benefit
or receipt under the ITA or OAS Act and Regulations.
[17]
In summary, the Minister’s determination of income
for that year which included the payment was correct. The decision regarding
the RSP payment period concerning the denial of the GIS benefits stands. Mr.
McArthur’s appeal is dismissed without costs.
Signed at Ottawa,
Canada, this 24th day of October 2017.
“R.S. Bocock”
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