ARCHIVED — Regulations Amending the Canadian Forces Members and Veterans Re-establishment and Compensation Regulations

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Vol. 145, No. 28 — July 9, 2011

Statutory authority

Canadian Forces Members and Veterans Re-establishment and Compensation Act

Sponsoring department

Department of Veterans Affairs

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary


Issue: There are concerns that some Canadian Forces veterans are not receiving the level of support and services that they require. These are Canadian Forces veterans who are the most seriously ill or injured and require greater monthly financial support and those Canadian Forces veterans receiving the earnings loss benefits who are at risk of receiving support that is insufficient to meet their basic needs (i.e. food, clothing, shelter). The provision of the disability award as a lump sum is also a concern and some veterans have expressed a desire to receive their award over time instead. Finally, a housekeeping amendment is needed as the name of one of the New Veterans Charter programs, the Job Placement Program, has been changed to Career Transition Services. These proposed regulatory enhancements are expected to increase earnings loss benefits for approximately 2 300 veterans, provide additional financial support through the permanent impairment allowance supplement to approximately 500 veterans, and provide approximately 29 500 Canadian Forces veterans and members with the option to receive their disability award as a lump-sum payment, as annual payments for the number of years chosen by the recipient, or a combination of both.

Description: On March 24, 2011, Bill C-55, An Act to amend the Canadian Forces Members and Veterans Re-establishment and Compensation Act and the Pension Act, also known as the Enhanced New Veterans Charter Act, received Royal Assent. The Act will come into force on a day to be fixed by the Governor in Council. The proposed amendments to the Canadian Forces Members and Veterans Re-establishment and Compensation Regulations regarding the provision of the permanent impairment allowance supplement, payment options for disability awards and the housekeeping amendment are required to align with the changes made in Bill C-55. The earnings loss benefit enhancements, while not flowing from Bill C-55, are another key component of the improvements to the New Veterans Charter announced in fall 2010.

The proposed enhancements to the New Veterans Charter will improve support for veterans and their families by ensuring a sufficient monthly income for veterans in receipt of earnings loss benefits, by providing additional monthly financial support to the most seriously injured Canadian Forces veterans, and by offering payment options for those receiving a disability award.

Cost-benefit statement: Broadly speaking, the key benefit from the amended Regulations is the increased well-being of veterans. As a result of increased income, veterans will also have the opportunity to further improve other aspects of their well-being related to their state of health, employability, and levels of community and family participation.

The estimated total net discounted benefits of the regulatory amendments over a 10-year period from 2012 to 2021 are a loss of $2.46 million. Although the financial outcome of the cost-benefit analysis (CBA) is slightly negative, it must be kept in mind that the money transferred to veterans contributes to improving their overall well-being, which has not been monetized. In particular, 3 496 veterans could benefit from increased health, employment opportunities and/or improved social relationships.

The most significant change, and major cost element, of the proposed regulatory amendments is the increase in the base level of the earnings loss benefit. Severely impaired or incapacitated veterans will also receive additional benefits, which further boost their income to a rate reflective of their increased costs. The increases in income implied by the regulatory proposal will result in groups of individuals moving from their current income level, to one which more adequately allows them to cover their basic needs without creating a disincentive to wellness. Analysis conducted for the proposed amendments demonstrates that the financial well-being of veterans will be improved to a point which is likely to result in an overall increase in their subjective well-being.

Business and consumer impacts: It is anticipated that the enhancements to the New Veterans Charter will have a positive impact for both the recipients and their communities. The earnings loss benefit and permanent impairment allowance enhancements will have a positive economic impact as these individuals will now receive more monthly financial support and will be more able to financially support themselves and their families. It is anticipated that they may also have more disposable income to spend on goods and services they require, thus generating more revenue for the businesses they frequent in their local communities — positively impacting the local economy.

Performance measurement and evaluation plan: The extent to which the financial and disability benefits meet the veterans’ expected outcomes is measured and reported on a regular basis. Detailed performance measurement strategies exist for the Financial Benefits Program and the Disability Benefits Program. These strategies were amended to include program changes introduced with this initiative. The evaluation plans have also been updated to reflect these recent enhancements. The plans include measurements of program accessibility, appropriateness, effectiveness, efficiency and acceptability.


Issue

The New Veterans Charter (NVC), implemented in 2006, represented the most significant change in veterans’ benefits since the end of the Second World War. Based on modern disability management principles, the NVC provides a comprehensive wellness package and offers both financial and non-financial benefits as follows: rehabilitation services, health benefits, career transition services, financial benefits, disability awards and case management.

While the NVC generally provides the support necessary for independence following military life, it was also recognized as a “living document” which would evolve to meet the changing needs of Canadian Forces members and veterans. Since the implementation of the NVC, findings from parliamentary committees, advisory groups, veterans’ organizations, the Office of the Veterans Ombudsman, as well as Veterans Affairs Canada’s (VAC) own evaluations, point to areas for improvement. While there were a broad range of suggested improvements, two main issues were the need to provide adequate financial support for the most severely ill and injured veterans and the need to provide more flexibility in the payment of disability awards.

On November 17, 2010, the Enhanced New Veterans Charter Act (Bill C-55) was introduced in Parliament proposing changes to the NVC to

  • improve access to the permanent impairment allowance;
  • introduce a monthly $1,000 permanent impairment allowance supplement for the most seriously injured or ill Canadian Forces veterans who are unable to be suitably, gainfully employed;
  • improve access to the exceptional incapacity allowance (provided for under the Pension Act); and
  • provide flexible payment options for those receiving a disability award.

Enhancements related to the earnings loss benefits, while they do not flow from Bill C-55, are another key component of the announced improvements to the NVC.

These enhancements respond to the Government’s commitment to continue to modernize support systems for Canadian veterans. The regulatory amendments required to support the legislative changes will ensure that Canadian Forces veterans are receiving more financial support to meet basic needs and will give all individuals who receive a disability award options for how they want to receive the payment thus providing flexibility to better meet the diverse needs of veterans and their families.

Four risks have been identified in achieving the objective of these enhancements:

  1. Program changes may not meet the expectations of all Canadian Forces members, veterans, families, veterans’ organizations, and other advocates, resulting in pressure for additional changes.
  2. VAC may not have the necessary information technology infrastructure in place to implement the program changes in the most effective manner by the implementation date.
  3. Eligible Canadian Forces members, veterans, and family members may not be aware of, or receive, the benefits to which they are entitled.
  4. Program changes within other federal departments may have an impact on VAC’s suite of programs and vice versa.

The first risk has been identified as a priority risk with a medium to high rating. The three additional risks have been assessed as having a low likelihood and a minor to moderate impact. The priority risk will be mitigated in a number of ways. VAC will be using a communications strategy that emphasizes the significant measures that government is taking to improve support, thus increasing the understanding and acceptance among Canadian Forces members, veterans and their families (i.e. Canadian Forces base visits, updates to VAC’s Web site, brochures). Future reviews and evaluations (e.g. evaluation of NVC programming planned in 2014–15) will continue to identify issues and areas for improvement. Additionally, the legislative amendment initiated by the Standing Committee on Veterans Affairs for a parliamentary review of the program enhancements within two years will ensure that the enhancements are meeting their intended objectives. As well, VAC will continue to have briefings with key veteran’s organizations to demonstrate the Government’s commitment to examine and make progress on benefits and services to Canadian Forces veterans and their families.

Objectives

There are four main objectives of the proposed regulatory amendments. First, they will improve the financial support for seriously ill or injured Canadian Forces veterans through a supplemental payment to those veterans receiving the permanent impairment allowance who are unable to be suitably, gainfully employed. Second, they will increase the earnings loss benefit which will help to ensure Canadian Forces veterans receiving this benefit have sufficient income to meet their basic needs. Third, these changes will provide flexibility in payment of the disability award for Canadian Forces members and veterans to provide the option for annual payments rather than just lump-sum payments in order to better meet the individual circumstances of different veterans and their families. Fourth, a housekeeping amendment is being made in the proposed Regulations to change the name of “Job Placement Program” to “Career Transition Services.”

Description

The proposed regulatory changes will be achieved through amendments to the Canadian Forces Members and Veterans Re-establishment and Compensation Regulations. Bill C-55, An Act to amend the Canadian Forces Members and Veterans Re-establishment and Compensation Act and the Pension Act, also known as the Enhanced New Veterans Charter Act, received Royal Assent on March 24, 2011. The proposed regulatory amendments regarding the supplement to the permanent impairment allowance, payment options for disability awards and the housekeeping amendment are components of Bill C-55’s implementation and must be aligned with the recently improved legislation so that eligible veterans, Canadian Forces members and their families may receive the benefits and services outlined therein. The changes to the earnings loss benefit are also part of the NVC enhancements announced this fall, but do not flow from Bill C-55. They are solely regulatory changes.

(1) Earnings loss benefits

The earnings loss benefit provides monthly financial assistance to replace lost income for veterans who are either participating in rehabilitation or are unable to be suitably, gainfully employed. Evidence has established that, based on the existing calculation, certain veterans are at risk of receiving insufficient financial support required to meet basic needs (e.g. food, shelter, clothing). The veterans at the highest risk are those who released prior to 1999, when military salaries were lower, those releasing at the lower military ranks and certain reservists.

The proposed amendments will increase the minimum earnings loss benefit provided to veterans while participating in rehabilitation or until age 65 if they are unable to be suitably, gainfully employed.

The earnings loss benefit for regular force and reserve force (Class C and Class B greater than 180 days) veterans will be enhanced so that the calculation will be based on 75% of the greater of the monthly military salary of the veteran at the time of military release indexed forward to the time of the earnings loss benefit approval or the monthly military salary of a basic corporal at the time the earnings loss benefit is approved. The new minimum income for these individuals will be $40,000 pre-tax per year.

For Class B less than 180 days and Class A reservists, the deemed monthly salary will also be increased from $2,000 to $2,700 to reflect the consumer price index inflation since this amount was established by the Service Income Security Insurance Plan (SISIP) in 1992. The monthly benefit for these reservists is calculated based on 75% of the deemed amount.

(2) Permanent impairment allowance supplement

The permanent impairment allowance recognizes the lost opportunity effects that a permanent and severe impairment has on employment and career progression opportunities. It is a monthly financial benefit, payable for life, to Canadian Forces veterans who suffer from a permanent and severe impairment for which they have been approved for rehabilitation and are entitled to a disability award or disability pension.

This proposed amendment will add $1,000 per month to provide additional financial support to the most seriously ill or injured recipients of the permanent impairment allowance who are totally and permanently incapacitated, which is defined in section 6 of the Canadian Forces Members and Veterans Re-establishment and Compensation Regulations as unable to engage in “suitable gainful employment” as a result of the condition for which they are approved for rehabilitation. “Suitable gainful employment” is employment that provides at least 66 2/3% of the veteran’s monthly pre-release military salary.

It is recognized that severely injured Canadian Forces veterans experience loss of employment potential and diminished career progression, resulting in a greater need for additional financial supports. The additional $1,000 per month will ensure that those individuals who are unable to work or work at the same capacity will receive additional monthly support.

(3) Disability award

The disability award is intended to recognize and compensate Canadian Forces veterans and members and, in some cases, surviving spouses/common-law partners, and surviving dependent children, for the non-economic impacts of a service-related disability, including pain and suffering, physical and psychological loss and impact on quality of life.

The disability award has been paid as an annually indexed, tax-free lump sum. Veterans have indicated that they would like more options when it comes to the payment of the disability award.

In order to address this concern, Bill C-55 amended the legislation to provide individuals receiving an award assessed at 5% or greater the option of receiving the disability award as a lump-sum payment, as annual payments for the number of years chosen by the recipient, or a combination of lump-sum and annual payments.

These additional regulatory amendments will provide further clarification on notification requirements to the client, rules around election of payment methods, conversion of the lump-sum amount to annual payments and calculation of interest.

(4) Minor housekeeping amendment

An amendment to the Canadian Forces Members and Veterans Re-establishment and CompensationRegulations needs to be made to change the name of the “Job Placement Program” to “Career Transition Services.” This change has no impact on program delivery as it is solely a name change to more accurately reflect the intent of the program.

Regulatory and non-regulatory options considered

The provision of benefits and services by the Government of Canada to Canadian Forces members and veterans, and other eligible recipients (e.g. surviving spouses), is governed under a legislative and regulatory framework. As such, there are no non-regulatory options to address these issues. Amendments to the Canadian Forces Members and Veterans Re-establishment and CompensationRegulations are required in order to effect the needed changes for the earnings loss benefit, as well as for the permanent impairment allowance supplement and disability award payment options newly authorized as a result of the passage of Bill C-55. No instrument other than regulations satisfies these requirements as it is strictly through regulation that these benefits can be formally provided. Without the proposed regulatory amendments, Canadian Forces veterans, including the most seriously injured or ill veterans, will continue to be at risk of receiving a monthly income insufficient to meet their basic needs.

Benefits and costs

The premise of the benefits in this analysis is based on the assumption, confirmed by a body of literature, that additional income accrued to a person impacts their life beyond the simple transfer of cash. Income procures goods and services, which in turn enhance a person’s well-being in many facets of life. Financial well-being, or the ability to have a standard of living which covers basic living expenses, is the basis upon which all other areas of well-being can increase. Financial well-being reduces financial stress on Canadian Forces veterans and their families by allowing them to afford the basic necessities of life, and it also has a positive effect on health, employment, and family and community life.

The benefits defined in this section thus represent the increased well-being procured by the income increases and other changes in the regulatory proposal, in the areas of

  • Financial well-being;
  • Mental and physical health;
  • Employment; and
  • Family and community life.

Income matters

A minimum level of income is necessary to ensure that basic needs such as food, shelter and clothing can be met. There are various ways to calculate this amount and many views on how poverty and low income can be conceptualized. The Statistics Canada Low Income Cut-off (LICO) estimates a family after-tax income threshold at $37,000 for 2008. Similarly, the Human Resources and Skills Development Canada “Market Basket Measure” (MBM) determined $37,000 to be the minimum required to ensure that earnings loss benefit recipients’ income remains above LICO with adequate disposable income.

Income brings health

The link between income and health has been well explored and there is a general agreement that the relationship is linear at lower incomes. According to one study on declining health, the threshold point of non-linearity was found to be equal to US$20,190 in 1991, roughly $32,000 in current Canadian dollars.

Overall, better incomes have been found to have an influence on health seeking behaviours, exposure to risk factors and on health outcomes even when controlling for other factors, including education levels. At higher incomes, individuals are able to adopt a healthier lifestyle either through greater participation in healthful activities, or through the purchase of goods and services, such as more nutritious food, better housing or other measures to ameliorate or prevent the onset of ill health. Low income is generally agreed to be a significant stressor, while the links between stress and poor health have also been well established.

Income can support access to training and then more income

While work itself can be stressful, unemployment is also a major point of stress and factor in decreasing well-being. For veterans, participation in vocational rehabilitation may be an important step towards long-term employment success. However, for some, low income may be an obstacle to participation. In a pre-NVC study, it was found that 30% of veterans receiving benefits from VAC wanted to take some work-related training courses in the following year; however, 66% perceived barriers to completing such courses including 70% who reported that the courses were too costly.

Other programs have found similar barriers to employment estimating that these costs could be up to a quarter of disposable income, which could dramatically affect the private returns of these programs, especially in the short run. This could result in individuals opting for lower wage jobs to cover immediate needs, rather than participating in programs.

Income can help you and your family be happier, healthier and more successful

On par with the importance of work on the level of well-being is the relationship to family and community. It is now widely recognized that social relationships have a powerful effect on mental and physical health. Many studies have shown that lack of social ties consistently predicts mortality from almost every cause of death. The lack of strong social ties seems to affect the ability to deal with stress which can negatively impact health outcomes. Other studies have shown a minimum of double mortality rate for those with small networks even when controlling risk factors and other factors.

Studies have found that overall low-income individuals are more socially isolated, less satisfied with their lives and feel they have less control over their lives, all factors that influence health. Social support has been found to be associated with health and well-being in its own right. Financial adequacy has also been found to positively influence the adjustment to civilian life after military service.

Estimated benefits

Ensuring a standard of living which covers basic needs removes a source of stress on individuals and their families. For a releasing Canadian Forces member, returning to civilian life involves a number of challenges linked to reintegrating into the civilian workforce and redefining one’s role in the family and community.

The regulatory proposal primarily involves changes in the calculation of the earnings loss benefit. Veterans approved for Veterans Affairs Canada rehabilitation services and who released at lower salaries will now receive a higher earnings loss benefit allowing them to achieve the basic income level of approximately $40,000. Severely impaired or incapacitated veterans also receive additional benefits, not addressed by these amendments, which further boost their income above this baseline to a rate reflective of their increased costs.

The proposed increases in income will result in groups of individuals moving from their current income level, to one which more adequately allows them to cover basic needs. Arriving at or going beyond this income threshold has an impact on a person’s “capability” to improve their state of well-being, which can be measured through improvements in their subjective well-being (SWB). Various income thresholds were used in the analysis, depending on the level of impairment or incapacity of a veteran, to determine if the increased benefits would likely improve their overall well-being.

The relationships between adequate income, state of health, ability to participate in rehabilitation programs and improved social relationships were established. The approach taken in the cost-benefit analysis model is to consider the state of well-being in each area (health, employment, and social relationships) at previous income levels and subsequently the likely improvements in well-being at a time after incomes have been enhanced. The changes in well-being are therefore quantified by considering the number of Canadian Forces veterans likely to be promoted, by the regulatory amendments, from an existing state of well-being to an enhanced state of well-being in each area (health, employment, and social relationships).

The cost-benefit analysis demonstrates that the financial well-being of these Canadian Forces veterans will be improved to a point, which is likely to result in an overall increase in their subjective well-being. The overall net discounted benefit transfer to Canadian Forces veterans after tax is $87 million. The earnings loss benefit and the indexation of the permanent impairment allowance supplement are taxable; the Regulations will therefore result in increased tax revenues of $40.4 million, which will benefit Canadians and the Canadian economy.

The Regulations also provide for the indexation of a permanent impairment allowance supplemental benefit to those veterans who are totally and permanently incapacitated. This change keeps the level of this $12,000 (2011 dollars) annual benefit in line with the cost of living.

Finally, the Regulations allow for those Canadian Forces veterans receiving a disability award to opt for a flexible payment scheme. The benefits of this change have not been monetized.

The average discounted benefits of the proposed Regulations are $12.7 million per year.

Estimated costs

The cost elements introduced by these regulatory amendments primarily relate to the increased earnings loss benefit payments to Canadian Forces veterans and the related payments to Service Income Security Insurance Plan members. The cost-benefit analysis model is based on estimating the number of Canadian Forces veterans likely to be receiving increased payments and then estimating the monetary increase required to bring their income to approximately $40,000. This financial transfer is the major cost element, resulting in the following costs: $116.8 million to Veterans Affairs Canada and $13.1 million to the Department of National Defence, discounted over 10 years.

The associated administration costs are small and are based on estimating the additional time taken to process new payments. The capital costs incurred are minimal, as the Regulations use existing systems to transfer funds to Canadian Forces veterans.

The indexation and administration of the permanent impairment allowance supplement to those Canadian Forces veterans who are totally and permanently incapacitated incurs relatively minor costs of $446,417, discounted over 10 years.

Changing the disability award scheme to incorporate flexible payments results in a 10-year discounted cost of $2.18 million for a benefit that is difficult to monetize. The average discounted costs of the proposed Regulations are relatively modest at $13 million per year; the outcome would be almost neutral without the impact of the disability award changes.

The Regulations also change the name of the current VAC “Job Placement Program” to “Career Transition Services;” this is a minor housekeeping change which incurs minimal costs.

Cost-benefit accounting statement

Cost-Benefit Accounting Statement Canadian Forces Members and Veterans Re-establishment and Compensation Act Regulatory Amendments

Cost-benefit statement

Base Year (2012)

Final Year (2021)

Total (PV)

Average Annual

A. Quantified impacts $

Benefits

Veterans released pre-’99

$4,863,425

$12,271,277

$60,543,600

$8,873,164

Veterans released in ’99 and after at lower release salaries

$1,060,090

$2,783,358

$13,682,973

$2,007,531

Veterans released from Class A and B Reserve

$257,745

$653,777

$3,220,519

$472,157

Service Income Security Insurance Plan recipients

$1,166,083

$1,393,577

$9,138,223

$1,276,832

Totally and permanently incapacitated veterans

$0

$183,075

$414,039

$69,730

Canadian economy

$3,502,299

$7,951,650

$40,448,871

$5,894,004

Total

$10,849,642

$25,236,714

$127,448,224

 

Costs

Veterans Affairs Canada

$9,548,615

$23,572,197

-$116,827,100

$17,103,226

National Defence

$1,672,968

$1,994,571

-$13,083,127

$1,827,873

Total

$11,221,583

$25,566,769

-$129,910,227

 

Net benefits

-$2,462,003

-$246,200

B. Quantified impacts in non-$ — e.g. risk assessment

Positive impacts

Veterans in pay who could benefit from increased physical and mental health

1 110

1 125

 

1 057

Veterans in pay who could have better chances of being suitably and gainfully employed

1 021

1 034

 

972

Veterans in pay who could benefit from improved social and family relationships

1 110

1 125

 

1 057

Veterans who will have the choice between annual and lump-sum disability award payment

1 999

1 725

 

1 918

Service Income Security Insurance Plan recipients who could benefit from increased physical and mental health

320

320

 

320

Service Income Security Insurance Plan recipients who could benefit from improved social and family relationships

320

320

 

320

C. Qualitative impacts Short list of qualitative impacts (positive and negative) by stakeholder

Veterans and Service Income Security Insurance Plan recipients

* A reasonable standard of living in which they are able to meet their basic living expenses

* Optimal levels of mental and physical health

* Enhanced employment opportunities and participation in the workforce

* Enhanced family and community participation

* Disability award flexible payment scheme

Canadian Forces

* Increased assurance to potential recruits of adequate support when discharged

Canadians

* Reduced health care costs for veterans

The potential costs and benefits of the proposed amendments to the Canadian Forces Members and Veterans Re-establishment and Compensation Act and its Regulations were identified through a review of the literature, consultations with Veterans Affairs Canada and the analysis of statistical information provided by Veterans Affairs Canada. The cost-benefit analysis was therefore based on the best available information.

It can be seen from the accounting statement that the costs of the earnings loss payments increase more than the rate of inflation. This is because of the declining number of pensioners, who received significant income offsets, within the total number of recipients.

Business and consumer impacts

The direct costs of the amendments are borne by Veterans Affairs Canada and the Department of National Defence in the form of increased payments to Canadian Forces veterans and to Service Income Security Insurance Plan members; there are no direct costs to business or consumers. Indirect benefits to business may occur as the result of Canadian Forces veterans spending their increased benefits payments on goods and services.

The regulatory amendments are not expected to have any significant impacts on domestic and international trade. Canada’s international reputation may grow as a result of the improved treatment of our Canadian Forces veterans.

Distributional impacts

The largest part of the cost impact, $116.8 million (present value over 10 years), will be incurred by Veterans Affairs Canada. For the purposes of this cost-benefit analysis, it is assumed that the remaining costs of $13.1 million (present value over 10 years) for Canadian Forces veterans in receipt of income replacement from the Service Income Security Insurance Plan will be incurred by the Department of National Defence. This is because Veterans Affairs Canada is responsible for all of the increased earnings loss benefit payments to Canadian Forces veterans and the associated administrative costs. Veterans Affairs Canada also assumes additional administrative costs associated with the delivery of a flexible payment system for the disability award, and the permanent impairment allowance supplement as well as the consumer price index (CPI) increases for totally and permanently incapacitated Canadian Forces veterans receiving a permanent impairment allowance supplement.

The cost-benefit analysis breaks the Canadian Forces veteran stakeholders down into classes based on both their military release status and their health status. The average annual impacts on the financial well-being of “typical” veteran stakeholders in each class are shown in the table below.

Table 1 — Average benefit per stakeholder

Benefits to Canadian Forces veterans released pre-’99

2012

2021

Number of Canadian Forces veterans in pay

708

718

Average change in earnings loss benefit to reach target income

$10,122

$25,070

Benefits to Canadian Forces veterans released in ’99 and after at lower release salaries

Number of Canadian Forces veterans in pay

339

343

Average change in earnings loss benefit to reach target income

$4,823

$11,973

Benefits to Canadian Forces veterans released from Class A Reserves and Class B Reserves (< 180 days)

Number of Canadian Forces veterans in pay

63

64

Average change in earnings loss benefit to reach target income

$6,017

$14,876

Benefits to Service Income Security Insurance Plan members

Number of Canadian Forces veterans in pay

320

320

Average change in earnings loss benefit to reach target income

$5,216

$6,233

Totally and permanently incapacitated veterans receiving permanent impairment allowance supplement

Number of Canadian Forces veterans in pay

0

782

Annual consumer price index increase

$ -

$234

It can be seen that the figures increase by more than just consumer price index indexation. This is explained by the change in average income offsets being received by Canadian Forces veterans over time. The earnings loss payment increase brings the minimum Canadian Forces veteran’s income to approximately $40,000. Due to the declining numbers of Canadian Forces veterans who receive pension income, which offsets the earnings loss payments required, the average earnings loss increase grows over the 10-year period.

Furthermore, 842 totally and permanently incapacitated Canadian Forces veterans will have their permanent impairment allowance supplement indexed to inflation.

In addition to the increase in financial well-being, Canadian Forces veterans will also have the opportunity to increase their overall well-being, based on the opportunities made available to them through increased income. The following table represents the number of Canadian Forces veterans who will have the potential to improve their well-being in the areas of health status, employment, and family and community participation as a result of the regulatory amendments. Additionally, 320 Service Income Security Insurance Plan members per year will also benefit from improved states of well-being.

Table 2 — Number of stakeholder who benefit

Discrete number of unique veterans who are receiving permanent impairment allowance (PIA), are receiving PIA and are totally and permanently incapacitated (TPI), or are simply receiving earnings loss (EL) benefits by release class

Total

Distribution by class

2012–21

Pre-1999

1999 or after

Canadian Forces veterans released from Class A Reserves and Class B Reserves (< 180 days)

Number of veterans who will simply receive increased EL

2 453

1 565

749

139

Number of targeted EL veterans who will also receive PIA

1 274

813

389

72

Number of EL and PIA recipients who are TPI

219

140

67

12

A total of approximately 19 200 disability award recipients are expected to take up the option of annual payments. As a result, these Canadian Forces veterans will be better able to manage their income streams.

Recently, Veterans Affairs Canada has completed a number of significant surveys (see footnote 1) in order to better understand the correlation between the income and the well-being of veterans. However, as none of these studies are longitudinal, they cannot be used to prove a cause and effect relationship between military service and life indicators after release or to verify the outcomes of Veterans Affairs Canada programs. Yet the finding that some veterans in receipt of New Veterans Charter programs appear to be financially vulnerable indicates that the programs are targeting groups that need income support. The overall finding of the cost-benefit analysis is that the proposed regulatory amendments would seem to meet these needs while incurring relatively little additional administrative overhead.

Canadians and the Canadian economy as a whole will also benefit through additional income tax payments payable on increased Canadian Forces veterans benefits.

For a copy of the full cost-benefit analysis, please see contact information at the end of this document.

Rationale

The proposed regulatory amendments will help to ensure that veterans participating in rehabilitation or those who are the most seriously ill or injured will receive a sufficient level of monthly income to ensure they can meet their basic needs. The amendments will also allow for the payment of the disability award in yearly payments, over a number of years to be determined by the recipient, thus addressing the concern that flexibility should be provided to better meet the diverse needs of veterans and their families.

A minimum level of income is necessary to ensure that basic need, such as food, clothing and shelter, can be met. The ability to have a standard of living which covers basic living expenses is the basis upon which all other areas of well-being can increase. Financial well-being reduces financial stress on Canadian Forces veterans and their families by allowing them to afford the basic necessities of life, and it also has a positive effect on health, employment, and family and community life. Financial adequacy has also been found to positively influence the adjustment to civilian life after military service.

The proposed regulatory amendments address the concern of inadequate financial support from veterans participating in rehabilitation or for the most seriously injured or ill while being modest enough that they will not create a disincentive to wellness.

Consultation

All major veterans’ organizations (i.e. Royal Canadian Legion, Army, Navy and Air Force Veterans in Canada, National Council of Veterans Associations, Canadian Association of Veterans in United Nations Peacekeeping, Canadian Peacekeeping Veterans Association, Gulf War Veterans Association of Canada, and NATO Veterans Organization of Canada) were engaged and briefed on the improvements to the NVC announced by the Minister of Veterans Affairs in September 2010. Stakeholders have advised that they see these improvements as a positive first step and a good start to address the identified gaps in the NVC. However, stakeholders (such as the New Veterans Charter Advisory Group) have also indicated that more improvements are needed and there is still work to be done.

The New Veterans Charter Advisory Group, established in 2007 with representatives from veterans’ organizations, academics and government officials, was an independent advisory group formed to provide expert advice and guidance to VAC with respect to the NVC implementation and VAC’s ongoing modernization effort. In June of 2009, they tabled a report titled Honouring Our Commitment to Veterans and Families: The “Living” Charter in Action which presented suggestions for improving services for Canadian Forces veterans and their families. Some of the recommendations were quite broad (e.g. actively promote New Veterans Charter programs and services); however, there were some specific recommendations that were acted upon in these recent enhancements to the NVC (e.g. improve access to the permanent impairment allowance). The National Council of Veterans Associations indicated that, while the recent enhancements were a good first step, more work needs to be done to address the remaining recommendations in “The ‘Living’ Charter in Action” report.

A new Ombudsman, Chief Warrant Officer (ret’d) Guy Parent, was appointed in November 2010. That same month, VAC staff met with, and briefed, the new Ombudsman and his staff on the enhancements to the NVC, and they were supportive of the changes. The Office of the Veterans Ombudsman will continue to advocate publicly for further program improvements.

Implementation, enforcement and service standards

It is expected that over the first five years, 2 300 veterans may benefit from the enhancement to the earnings loss benefit, while approximately 500 veterans will be eligible for the new permanent impairment allowance supplement.

Further, approximately 34 189 Canadian Forces veterans and members expected to receive a disability award over the next five years. Of these, 29 471 are expected to have a disability award of 5% or more, with approximately 9 136 choosing to receive the payment in periodic payments.

A variety of communications products and media will be used to inform individuals of the recent changes. The various communications products will help to show that supporting veterans and their families is a priority for the Government of Canada and that the Government is responding to the needs of modern-day Canadian Forces members and veterans and acting on its commitment to have programs evolve with the needs of the veterans. Some examples of communication methods that will be used to disseminate information are

  • National news releases;
  • VAC information sessions being held at 19 Canadian Forces bases throughout 2010/2011;
  • Articles published in Salute!, VAC’s quarterly, bilingual newspaper for veterans and their families;
  • Veteran/Canadian Forces member newsletters;
  • Veterans Affairs Canada’s Web site will be updated to include all relevant information on the new NVC enhancements;
  • Existing VAC social media networks as well as third-party social media networks (Canadian Forces Facebook pages, etc.) will be used to provide information on the NVC enhancements; and
  • National advertising campaign — using television, radio, print and Internet advertising, which will be adapted for regional audiences.

These proposed regulatory enhancements will not impact the way by which the programs are delivered. These are enhancements to existing programs and activities will continue to be administered in the same way. The possible increase in applications received as a result of these enhancements will be absorbed within existing resources. It is not anticipated that enhancing the existing benefits will have an impact on legislative and/or regulatory compliance. Reviews will continue to be conducted in accordance with the performance measurement plans.

Veterans Affairs Canada also has published service standards. These are available on the Department’s external Web site (www.vac-acc.gc.ca). There are specific service standards for the earnings loss benefit and disability benefits. The changes from these enhancements should still allow the service standards to be maintained close to the current average processing times. Review processes are also in place for each program when individuals are not satisfied with a decision that is rendered.

Performance measurement and evaluation

Given these are enhancements to existing programs, the outcome measurements already exist and are established for these programs (i.e. Financial Benefits Program and Disability Benefits Program). As the new supplement is part of the permanent impairment allowance, it will be evaluated in the same way as the existing program.

Respective Performance Measurement Strategy Frameworks have been developed for both the disability and financial benefits programs, and have been updated based on the recent enhancements. These frameworks will ensure that the proper systems and processes are in place to collect and analyze data for program performance monitoring purposes and to ensure that the eligible veterans, Canadian Forces members and eligible family members’ needs are being met. Performance measurement is intended to produce objective, relevant information on program and organizational performance that management can use to make informed decisions, ensure desired results and improve the overall performance of the programs. Evaluation allows for periodically and objectively assessing the effectiveness of the programs, including efforts to achieve intended results, impacts — both positive and negative — and cost effectiveness.

This regulatory proposal anticipates that by increasing the minimum income used to calculate the earnings loss benefit, it will logically increase the financial support available to lower income veterans and thereby ensure that all program recipients have a minimum pre-tax income of approximately $40,000. Further, by implementing the permanent impairment allowance supplement, it will ensure that the most seriously impaired Canadian Forces veterans who are unable to be suitably, gainfully employed will receive a total pre-tax income of approximately $58,500 (based upon 2011 rates). The total pre-tax income includes $40,000 of earnings loss benefits plus a minimum of grade 3 permanent impairment allowance of approximately $6,500 and an additional permanent impairment allowance supplement of $12,000.

The logic of the Financial Benefits Program (of which earnings loss benefits and permanent impairment allowance are components) proposes that, as a result of access to income support, eligible veterans and other program recipients will be able to fund basic needs (i.e. the costs of food, shelter, clothing, health care, and transportation).

If, through this proposal, program recipients receive increased levels of earnings loss benefits and the most seriously disabled receive the permanent impairment allowance supplement, it follows then, that they will be better able to fund their basic needs (recognizing that other factors, such as spending habits or other personal circumstances, family composition and regional variations in cost of living may also influence this outcome).

In accordance with logic model theory, the level of control the Financial Benefits Program has over the final outcome is understood to be influenced by multiple other factors or programs which are beyond the control of the Department. Recognizing this limitation however, the program theory of the Financial Benefits Program surmises that if eligible veterans and other program recipients have access to income replacement they will subsequently use this income to fund their basic needs and in this regard, will contribute to the achievement of the ultimate outcome of this program, specifically that “Eligible Veterans’ and other program recipients’ needs for food, shelter, clothing, health care and transportation are met.”

Within the context of this regulatory proposal, indicators for all three immediate outcomes will be measured and reported on an annual basis as part of either the Financial Benefits Program or the Disability Benefits Program. Data for outcomes will be measured and reported dependent upon the availability of resources. Additional resources may be needed to carry out the necessary survey with a sample size representative of individuals directly impacted by the Enhanced New Veterans Charter Regulations.

Contact

Suzanne Levesque
Director
Cabinet and Legislative Affairs
Departmental Secretariat and Policy Coordination Division
Veterans Affairs Canada
66 Slater Street, Room 1527
Ottawa, Ontario
K1A 0P4
Telephone: 613-992-3801
Fax: 613-954-1055
Email: suzanne.levesque@vac-acc.gc.ca

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to section 94 of the Canadian Forces Members and Veterans Re-establishment and Compensation Act (see footnote a), proposes to make the annexed Regulations Amending the Canadian Forces Members and Veterans Re-establishment and Compensation Regulations.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Suzanne Levesque, Director, Cabinet and Legislative Affairs, Veterans Affairs Canada, 66 Slater Street, Ottawa, Ontario K1A 0P4 (tel.: 613-992-3801; fax: 613-941-5434; email: suzanne.levesque@vac-acc.gc.ca).

Ottawa, June 16, 2011

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE CANADIAN FORCES MEMBERS AND VETERANS RE-ESTABLISHMENT AND COMPENSATION REGULATIONS

AMENDMENTS

1. The heading of Part 1 of the Canadian Forces Members and Veterans Re-establishment and Compensation Regulations (see footnote 2) is replaced by the following:

CAREER TRANSITION SERVICES

2. (1) The portion of subsection 2(1) of the Regulations before paragraph (a) is replaced by the following:

2. (1) For the purpose of subsection 3(1) of the Act, the Minister may provide career transition services to the following members or veterans if they were not released under item 1 or 2 of the table to article 15.01 of the Queen’s Regulations and Orders for the Canadian Forces:

(2) Subsection 2(2) of the English version of the Regulations is replaced by the following:

(2) The Minister may also provide career transition services to any veteran to whom an income support benefit is payable under section 27 of the Act.

3. (1) The portion of section 3 of the Regulations before paragraph (a) is replaced by the following:

3. For the purposes of subsection 3(2) of the Act, the Minister may provide career transition services to

(2) Subparagraphs 3 (a)(ii) and (iii) of the Regulations are replaced by the following:

4. Section 4 of the Regulations is replaced by the following:

4. An application for career transition services shall be made in writing and shall include, at the request of the Minister, any information that is necessary to enable the Minister to assess whether the applicant is eligible for those services.

5. (1) The portion of section 5 of the Regulations before paragraph (a) is replaced by the following:

5. In developing a career transition plan, the Minister shall have regard to the following principles:

(2) Paragraph 5 (b) of the Regulations is replaced by the following:

  • (b) the plan shall be based on a consideration of career transition services already received by an applicant.

6. Sections 18 to 20 of the Regulations are replaced by the following:

18. Subject to section 21 and for the purpose of subsection 19(1) of the Act, the imputed income of a veteran referred to in subsection 8(1) of the Act is equal to

  • (a) in the case of a veteran whose final release was from the regular force, the greater of the veteran’s monthly military salary at the time of release, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable; and
  • (b) in the case of a veteran whose final release was from the reserve force, if the event that resulted in the health problem occurred
    • (i) during regular force service, the greater of the veteran’s monthly military salary at the time of release from that service, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (ii) at any time during Class C Reserve Service, the greater of the veteran’s monthly military salary, adjusted from the date of completion of the Class C Reserve Service until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (iii) at any time during Class B Reserve Service of more than 180 days, the greater of the veteran’s monthly military salary, adjusted from the date of completion of the Class B Reserve Service until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable, and
    • (iv) during Class A Reserve Service or Class B Reserve Service of no more than 180 days, $2,700.

19. Subject to section 21 and for the purpose of subsection 19(1) of the Act, the imputed income of a veteran referred to in subsection 9(1) of the Act is equal to

  • (a) in the case of a veteran who was released from the regular force, the greater of the veteran’s monthly military salary at the time of release, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable; and
  • (b) in the case of a veteran who was released from the reserve force, if the injury or disease that led to the release was incurred or contracted
    • (i) during regular force service, the greater of the veteran’s monthly military salary at the time of release from that service, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (ii) at any time during Class C Reserve Service, the greater of the veteran’s monthly military salary, adjusted from the completion of the Class C Reserve Service until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (iii) at any time during Class B Reserve Service of more than 180 days, the greater of the veteran’s monthly military salary, adjusted from the date of completion of the Class B Reserve Service until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable, and
    • (iv) during Class A Reserve Service or Class B Reserve Service of no more than 180 days, $2,700.

20. Subject to section 21 and for the purposes of subsection 23(1) of the Act, the imputed income for a member or veteran is equal to

  • (a) in the case of a member who dies during regular force service, the greater of the member’s monthly military salary at the time of death, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable;
  • (b) in the case of a member who dies during reserve force service, if the injury or disease that resulted in the death was incurred, contracted or aggravated, as the case may be,
    • (i) during regular force service, the greater of the member’s monthly military salary at the time of release from the regular force service, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (ii) at any time during Class C Reserve Service, the greater of the monthly military salary of the member, adjusted from the earlier of the date of completion of the Class C Reserve Service and the date of the member’s death until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (iii) at any time during Class B Reserve Service of more than 180 days, the greater of the monthly military salary of the member, adjusted from the earlier of the date of completion of the Class B Reserve Service and the date of the member’s death until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable, and
    • (iv) during Class A Reserve Service or Class B Reserve Service of no more than 180 days, $2,700;
  • (c) in the case of a deceased veteran whose final release was from the regular force, the greater of the veteran’s monthly military salary at the time of release, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable; and
  • (d) in the case of a deceased veteran whose final release was from the reserve force, if the injury or disease that resulted in the death was incurred, contracted or aggravated, as the case may be,
    • (i) during regular force service, the greater of the veteran’s monthly military salary at the time of release from the regular force, adjusted until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (ii) at any time during Class C Reserve Service, the greater of the veteran’s monthly military salary, adjusted from the date of completion of the Class C Reserve Service until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable,
    • (iii) at any time during Class B Reserve Service of more than 180 days, the greater of the veteran’s monthly military salary, adjusted from the date of completion of the Class B Reserve Service until the benefit is payable, and the monthly military salary for a basic corporal in the standard pay group at the time the benefit is payable, and
    • (iv) during Class A Reserve Service or Class B Reserve Service of no more than 180 days, $2,700.

7. The portion of section 42 of the Regulations before paragraph (b) is replaced by the following:

42. An application for a permanent impairment allowance or an increase to a permanent impairment allowance shall be made in writing and shall include

  • (a) medical reports or other records that document the veteran’s health problem creating the permanent and severe impairment or the total and permanent incapacity, as the case may be;

8. Subsection 44(1) of the Regulations is replaced by the following:

44. (1) The amounts set out in column 2 of items 1, 2 and 2.1 of Schedule 2 to the Act shall be adjusted on January 1 of each year in accordance with the percentage increase to the Consumer Price Index for the year ending on September 30 of the previous year.

9. The Regulations are amended by adding the following after section 54:

54.1 (1) For the purpose of subsection 52.1(1) of the Act, an election shall be made in writing no more than 90 days after the day on which the amount of the disability award is determined under section 52 of the Act.

(2) For the purpose of subsection 52.1(2) of the Act, the Minister shall inform the member or veteran in writing of their right to make an election.

54.2 (1) For the purpose of the description of C in paragraph 52.1(1)(b) of the Act, the amount of interest for the year is equal to the amount determined by the following formula calculated as of the day on which the amount of the disability award is determined:

A/D - A/B

where

A is the amount of the disability award that is to be paid in annual payments;

D is the present value of $1 on the same dates as the annual payments; and

B is the number of years indicated by the member or veteran.

(2) The interest rate used to determine the value of D is equal to the spot rate as determined from the following series of yields published by the Bank of Canada on the last week of the month preceding the day on which the amount of the disability award is determined:

  • (a) V121778: Treasury Bills - 3 month;
  • (b) V121780: Treasury Bills - 1 year;
  • (c) V121786: Government of Canada benchmark bond yields, 2 year;
  • (d) V121787: Government of Canada benchmark bond yields, 3 year;
  • (e) V121788: Government of Canada benchmark bond yields, 5 year;
  • (f) V121789: Government of Canada benchmark bond yields, 7 year;
  • (g) V121790: Government of Canada benchmark bond yields, 10 year;
  • (h) V121791: Government of Canada benchmark bond yields, long-term; and
  • (i) V121758: Government of Canada marketable bonds, average yield, over 10 years.

54.3 (1) For the purpose of subsections 52.1(5) and (6) of the Act, the lump sum is equal to the present value of the annual payments remaining to be paid calculated as of the day on which the election is made.

(2) The interest rate used to calculate the present value is equal to the spot rate as determined from the yields referred to in subsection 54.2(2) that are published by the Bank of Canada on the last week of the month preceding the day on which the election is made.

COMING INTO FORCE

10. These Regulations come into force on the day on which they are registered.

[28-1-o]

Footnote 1
Veterans Affairs Canada, 2010 National Client Survey, Survey on Transition to Civilian Life: Report on Regular Force Veterans, Income Study: Regular Force Veteran Report.

Footnote 2
SOR/2006-50

Footnote a
S.C. 2005, c. 21