This Blog was written by Jane Martin, Scotia Wealth Management

Winding its way through the Senate approval process, Bill C-22, the “Canada Disability Benefit Act” reflects a promise by the federal government to introduce a guaranteed income supplement for Canadians with disabilities. Person living with disabilities comprise a disproportionate percentage of those living below the poverty line, and the poverty rate increases with the severity of disability.[1]

The Act, which does not set out eligibility requirements or payment amounts, is intended to supplement the incomes of Canadians aged 18-64 living with disabilities. Bill C-22 was introduced in the House of Commons in June 2022 and passed third reading in February. The bill passed third reading in the Senate in May of this year, at which time it was returned to the House with the amendments.

Senate amendments, most of which were accepted by the House, included a right of appeal for those denied benefits, and the establishment of stronger timelines for the rollout of the benefit. The Senate-proposed amendment which was rejected by the government sought to prevent claw backs of benefits from insurance providers. The federal government, citing the provincial authority to regulate insurance providers, instead proposes to negotiate with the provinces (and territories) and engage with the insurance industry to ensure that benefits delivered under the Act will not be clawed back. Ultimately the Senate passed the Bill without the insurance claw back amendment, citing the desperate need for a disability benefit to be put in place.

Federal negotiations with the provinces and insurance carriers are not likely to be quick or simple, and the prospect remains that the delivery of the income supports could be significantly delayed by this issue. The prospect of provincial programs clawing back their own disability benefits for recipients of federal benefits is not without precedent: for example, during the pandemic, some provinces cut back on social assistance and other provincial benefits for those who received federal Canadian Emergency Response Benefits (CERB).

In Ontario, those who qualify for the “Ontario Disability Support Plan” (ODSP) benefits saw a 5% increase in benefits in 2022, yet their income still sits approximately $10,000 below the official poverty line. If federal income benefits are clawed back, this gap may not lessen.

In the absence of the regulations, to be established within one year of Bill C-22 receiving royal assent, it is not clear whether eligibility for federal income supplements ought to change the estate planning contemplated for those who might be able to provide support for beneficiaries living with disabilities. Best practices in Ontario for such will-makers often lead to the establishment of discretionary trusts (aka Henson Trusts) – and given the lack of regulations available to suggest whether gifts or inheritances or gifts might disqualify a recipient from eligibility for a federal income supplement, it would appear wise to stay the course with this style of planning. If family assets allow, access to income supplements may not be necessary, but better safe than sorry. As with many things in life, the devil will be in the details, in the case, the regulations for Bill C-22, which will hopefully provide clarity and certainty for Canadians with disabilities, and those who support and love them.

[1] See for example: Stuart Morris, Gail Fawcett, Laurent Brisebois, Jeffrey Hughes “A demographic, employment and income profile of Canadians with Disabilities aged 15 years and over, 2017” https://www150.statcan.gc.ca/n1/pub/89-654-x/89-654-x2018002-eng.htm.  A similar survey was conducted in 2022 and new statistics are expected at some time in 2023.