Retirement Income Planning:  Know Your GIS Rules

Changes to the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) abound as 2011 begins and taxpayers and their advisors will want to stay abreast of them, especially since a controversy broke out in parliament late last year about new income inclusion rules affecting the low income applicants for the GIS.

Last May the federal government made a policy change that would cause RRIF lump sum payments to be included as income for GIS purposes without exception. Prior to that GIS eligibility could be calculated using current year income, thereby excluding previous year lump sum RRIF payments. This went largely unnoticed until November 23^rd, when Gerry Byrne, a Newfoundland MP, stood in the House of Commons to demand why this change was made without public notice or discussion, given its significant impact on other benefits available for many Canadians.

In many cases the GIS is used by seniors to put a roof over their heads and food on the table. A pensioner may have no other source of funds than his RRIF for an unexpected expense such as a funeral or appliance breakdown. A small RRIF can be quickly deplete and deny the GIS is adding insult to injury in cases such as this. Further, in several provinces, including Newfoundland and Nova Scotia, GIS eligibility is used for the threshold for other government programs for low-income seniors. In Nova Scotia, for example, a person who is eligible for the GIS does not have to pay the annual Pharmacare premium of $424 and qualifies for property tax rebates.

Human Resources Minister Diane Finley has put the policy on hold pending review. GIS eligibility will be calculated using the old rules until further notice. Seniors and their advocates should keep a close eye on this and other issues that impact a valued segment of our society.

ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes and the Knowledge Bureau certificate course: Tax Efficient Retirement Income Planning