Basic Life Insurance
Effective: August 1, 1998
Members who are eligible for a pension from the Public Service Pension Plan should be advised that the mandatory $2,000 Basic Life Insurance coverage is now optional. Cabinet's decision to allow retirees to 'opt out' of this coverage stemmed from changes to the Income Tax Act effective July 1994, which removed the tax exemption on life insurance premiums for the first $25,000 of coverage.
While the employer pays 100% of the premium for this insured benefit, it is deemed to be a taxable benefit that must be included in the pensioner's gross income to determine their total income tax deduction. As a result, many retirees have requested that this benefit coverage should no longer be mandatory.
In response to this, Order-in Council 435/98 was passed on February 18, 1998, allowing members to waive their Basic Life Insurance coverage on their retirement, or at any time during retirement, by completing a specific Waiver. This Waiver of the Basic Life Insurance coverage is irrevocable.
PenPay System Changes
The OPB has arranged for PenPay to be adjusted to accommodate these changes effective August 1998. When the Board receives the completed and signed Waiver, we will cancel the Basic Life Insurance coverage in the earliest payroll month following the date of receipt.
Notification of Retirees
The Board is sending notification to the affected retirees in late June 1998. As you counsel retiring members about their insured benefits, please inform them that the $2,000 Basic Life Insurance coverage is optional. However, the decision to waive the entitlement to this coverage is irrevocable. A copy of the Waiver is attached.
Please note that this option does not apply to former employees of the LCBO and the LLBO.