CARP Welcomes Quick Reversal on Change Affecting Low Income Seniors – Certain RRIF withdrawals will not affect GIS eligibility


December 7, 2010

TORONTO, ON: CARP welcomes the quick reversal of a policy change that would have hurt low income seniors and calls for a comprehensive solution for low income seniors with modest savings in RRSPs or RRIFs.

CARP requested and received written confirmation [attached] from Diane Finley, Minister of Human Resources and Skills Development that a policy change introduced in May 2010 but only coming to light recently would be reversed immediately. Prior to the change, certain lump sum RRIF withdrawals were not included in determining eligibility for GIS and the May 2010 policy change would have included such withdrawals thereby reducing or eliminating their GIS benefits for the following year.

This created a potential hardship for low income seniors reliant on GIS but having drawn on modest savings for extraordinary expenses like funerals or medical costs. The RRIF withdrawals were taxable in any event, but the inclusion in determining GIS eligibility created the hardship. The pre-existing policy clearly recognized this concern and exempted certain of such withdrawals from the determination for GIS eligibility.

“When I learned that the department’s recent change in GIS policy might have unintended consequences for some seniors, I immediately instructed my department to review the change and I made the decision to return to the previous policy”, wrote Minister Finley in her attached letter.

While the immediate situation has been resolved for the time being, it raises the need to more comprehensively respond to the plight of low income Canadians who might have tried to save a bit for their own retirement and now find that the GIS eligibility rules combined with the treatment of unexpected RRIF withdrawals undermine their efforts.

Possible solutions include increasing the current exemption for casual earnings of up to $3,500 before such earnings reduce GIS eligibility and expanding it to include such RRIF and RRSP withdrawals or allowing a one time rollover of modest amounts of RRSP and RRIF funds into a TFSA which does not affect GIS eligibility.

“Low income Canadians who try to save a bit for their own retirement often face contradictory rules that undermine that effort. People with low career earnings are not generally suitable candidates for tax deferred savings like RRSPs and the GIS eligibility rules just magnify the problems they face on retirement. While the resolution of this issue now is welcome news, government should use this opportunity to craft a better solution for all low income Canadians as they try to save a bit for their own retirement”, said Susan Eng, VP Advocacy for CARP.

CARP is a national, non-partisan, non-profit organization committed to advocating for a New Vision of Aging for Canada, social change that will bring financial security, equitable access to health care and freedom from discrimination. CARP seeks to ensure that the marketplace serves the needs and expectations of our generation and provides value-added benefits, products and services to our members. Through our network of chapters across Canada, CARP is dedicated to building a sense of community and shared values among our members in support of CARP’s mission.