ARCHIVED - Ombudsman Calls for Fair Treatment for Injured Canadian Forces Veterans

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March 6, 2007

The Honourable Gordon O’Connor, P.C., M.P.
Minister of National DefenceNational Defence Headquarters
Major-General George R. Pearkes Building
13th floor, North Tower
101 Colonel By Drive
Ottawa, Ontario
K1A 0K2

Dear Minister O’Connor: 

I am writing you to set out my position with respect to the two outstanding recommendations made in our office’s special report, entitled Unfair Deductions From SISIP Payments to Former CF Members.

I. Background

The Office of the Ombudsman conducted an investigation into the Service Income Security Insurance Plan – Long Term Disability Plan (SISIP LTD) after receiving more than 50 complaints related to the plan and benefits payable to Canadian Forces members. Although certain complaints were resolved as a result of changes made to the plan and through legislation, some matters continued to be a source of dissatisfaction among serving and former Canadian Forces members.

SISIP LTD is a group disability insurance plan that guarantees disabled Canadian Forces members replacement income if they become “totally disabled” or if they are released from the Canadian military for medical reasons. The plan guarantees 75 percent of a Canadian Forces member’s income level at the time of his or her release from the military for up to two years after his or her release. After this two-year period, payments can continue until the former military member reaches the age of 65 if he or she remains disabled.

However, SISIP LTD does not necessarily pay 75 percent of the income level at release to former Canadian Forces members. The plan takes into account any other “relevant sources of income” and only pays out the amount that would bring the total income to the 75 percent level. Most notably, and in my view problematically, SISIP LTD considers monthly Pension Act disability pensions as a “relevant source of income” and deducts such pensions from the amount that would otherwise be paid to the former Canadian Forces member.

Many of the complaints that our office received concerned the deduction of these Pension Act disability pensions from monthly SISIP LTD benefits. Complainants argued that it was unfair that disability pensions were considered as a source of income under the SISIP LTD formula, when the purpose of the disability pension was not to act as income replacement, but to compensate them for the pain and suffering they had endured as a result of becoming disabled while serving their country.

After a thorough investigation, our office agreed with the complainants and concluded that it was an unfair practice for SISIP LTD to consider Pension Act disability pensions as income and to deduct them from SISIP LTD benefits.

In October 2003, our office presented five recommendations to address this fundamental unfairness to then Defence Minister John McCallum. In response, he thanked our office for its “thoughtful and timely” work and agreed with all of the recommendations in the special report.

Since that time, three of the recommendations have been implemented. However, two remain outstanding:

  1. That the Minister of National Defence present the necessary submission to the Treasury Board Secretariat of Canada and ensure all other necessary steps are taken to amend the SISIP LTD insurance policy so that Pension Act disability pensions do not reduce the amount of SISIP LTD benefits payable to former CF members; and that
  2. The Minister of National Defence take the necessary steps to ensure that former CF members who had their SISIP LTD benefits reduced on account of disability pensions received under the Pension Act should be reimbursed for the amounts that were deducted from their benefits as of October 27, 2000. 

II. Follow up to Special Report

1. Significant Support for Recommendations

The recommendations in our report have received widespread public support, including from veterans, veterans associations and Parliamentarians. Notably, on November 4, 2003, the House of Commons Standing Committee on National Defence and Veterans Affairs passed a unanimous motion calling on “the Defence Minister and government to accept and enact the recommendations forthwith.”

More recently, the House of Commons passed the following motion on November 7, 2006:

That, in the opinion of the House, the government should immediately take the following steps to assist members and veterans of the Canadian Forces and their families:…..
4. eliminate the unfair reduction of Service Income Security Insurance Plan (SISIP) long term disability benefits from medically released members of the Canadian Forces; …..

2. New Developments

During the course of the office’s investigation, our investigators were advised that the cost of eliminating the Pension Act deductions from SISIP LTD monthly benefits would be approximately $5 million a year. However, in May 2006, our office was informed that the total cost to implement the two outstanding recommendations in our special report was now estimated to be $320 million.

Needless to say, this new figure came as a surprise to us, particularly given that the original figure of $5 million was provided to our office by SISIP officials. As a result of this new information, we met with the President of SISIP in June 2006 in order to obtain an explanation of the estimates and the significant discrepancy.

In October 2006, we were informed that the Office of the Superintendent of Financial Institutions (OSFI) had reviewed the estimates and determined that the cost of eliminating the Pension Act deductions from SISIP LTD monthly benefits, retroactive to October 2000, would be between $275 million and $295 million. Given that these figures were reviewed and verified by OSFI, I have no reason to question their accuracy.

III. An Issue of Fundamental Fairness

I recognize that this new estimate is significantly higher than originally assessed. However, the inherent unfairness that our recommendations seek to correct remains: The situation faced by former Canadian Forces members who have their SISIP LTD payments reduced by the amount of their disability pension is profoundly unfair, and it needs to be addressed and resolved. 

Those who are suffering – former Canadian Forces members who have had to retire as a result of their injuries – are the most disadvantaged of our veterans. They often suffer from serious psychological or physical injuries incurred while serving their country. And yet they are penalized – in some cases, severely penalized – by rules which must be reviewed and changed. I will outline the nature and source of the problem.

1. The Pension Act

The SISIP LTD treatment of disability pensions as a source of income is unfair and contradicts the underlying purpose of disability pensions awarded under the Pension Act. Disability pensions are not intended to act as income replacement. This is borne out by a number of factors.

Section 2 of the Pension Act clearly states that disability pensions are paid in order to fulfill “the recognized obligation of the people and Government of Canada to provide compensation to those members of the forces who have been disabled or have died as a result of military service.” The payments are meant to provide compensation for the loss of enjoyment of life and for pain and suffering caused by a specific injury.

If there was any doubt as to the purpose of a disability pension, it was eliminated when the Pension Act was amended in 2000 to allow all currently serving Canadian Forces members, regardless of where their service-related injury occurred, to draw a disability pension while continuing to receive their full military pay.

I would also note that the Pension Act does not link eligibility for a disability pension to a loss of income. In fact, there are a number of retired Canadian Forces members who are gainfully employed and who are collecting disability pensions in addition to their salary.

Finally, if disability pensions awarded under the Pension Act were meant to be income replacement, they would have been made taxable. This is not the case.

In light of the above, it is clear – and, indeed, indisputable – that Pension Act disability pensions are not meant to be income replacement. As I indicated above, they must be characterized as amounts paid for pain, suffering and loss of enjoyment of life.


That being said, I recognize that SISIP LTD is an income replacement plan. As described above, its purpose is to provide disabled military members with 75 percent of their salary on release, if they are too disabled to continue serving in the Canadian Forces. As an income replacement plan, it is logical that the benefits to which a retired member may be entitled under SISIP LTD should be subject to a reduction when there are other sources of employment income. However, disability pensions payable under the Pension Act are not linked to salary, and therefore should not be considered as income replacement.

3. A Fundamental Unfairness

It is fundamentally unfair that military members who are medically unable to serve in the Canadian Forces – and who are forced to give up their career and way of life – do not receive the full benefit of their Pension Act disability pension. But this is clearly the case as a result of their SISIP LTD monthly income replacement benefit being reduced by the amount of their disability pension.

This unfairness becomes even more evident when those who are forced to leave the Canadian Forces are compared with military personnel who have been injured or disabled but whose injuries or disabilities are less serious. The latter can remain in the Canadian Forces, receiving their full military pay and adding to their retirement plan, while still being entitled to a disability pension under the Pension Act.

On October 26, 2005, I wrote to then Defence Minister Bill Graham highlighting the unfair treatment faced by our veterans, and urging him to take immediate action. A copy of that letter is attached. I believe that it clearly demonstrates the significant inequity suffered by disabled Canadian Forces members who must retire in comparison with Canadian Forces members who also suffer an injury, but do not have to leave the military (see in particular pages 2 and 3). 

The fact that the group of individuals receiving SISIP LTD is vulnerable, and already disadvantaged by disabilities serious enough to require them to give up their careers and collect long-term disability, leads me to the view that the inequity might very well be serious enough to attract the protection of human rights legislation, as well as the protection of the equality provisions set out in section 15 the Canadian Charter of Rights and Freedoms, which identify physical and mental disabilities as prohibited grounds of discrimination.

4. New Veterans Charter

I must also mention that the current inequity related to SISIP LTD has only been aggravated by the New Veterans Charter, which came into force in April 2006. That is because now, under the new regime, when a member is injured or suffers a disability as a result of military service, he or she is eligible to receive a lump-sum payment, instead of a monthly Pension Act disability pension. The payment is a tax-free, lump sum disability award in order to compensate for the non-economic effects of a service related injury. These lump-sum payments can be made to either serving or former members, and are not considered a “relevant source of income”, and therefore will not offset SISIP LTD monthly benefits. It is very difficult to understand why this lump sum payment should be viewed differently from one that is received monthly.

It is important to note that the New Veterans Charter does not have retroactive effect. It did not fix the unfairness that existed prior to its enactment. Eligible former Canadian Forces members not falling under the New Veterans Charter will continue to have their SISIP LTD payments reduced by the amount of their disability pension. Therefore, the two outstanding recommendations aimed at rectifying this unfairness are as valid today as they were when they were made in 2003.

5. The Way Forward

I strongly believe that the appropriate and just thing to do is to fix the significant unfairness that currently prevails regarding the SISIP LTD. I urge you to find a principled solution that will satisfactorily rectify the current inequity.

I believe the dominant consideration here should not be one of a financial nature. Fundamental principles and values ought first and foremost to inform the debate. I am referring to deeply ingrained Canadian values which call for everyone to be treated fairly and equally. I also have in mind the profound sense that Canadians have that our disabled veterans deserve to be treated in a manner that is beyond reproach. The sacrifices that our disabled veterans have made and the price they continue to pay every day as a result of their disability demand that they must receive generous, fair and equal treatment.

It has often been said that a society should be judged by the manner in which it treats its most disadvantaged groups. Preventing discriminatory treatment of society’s disadvantaged groups is one of the goals of section 15(1) of the Charter of Rights and Freedoms. Laws and government policies must be conceived and applied in a non-discriminatory manner. All Canadian Forces members who suffer a service-related disability should be treated equally, and those who are the most disadvantaged should not be treated in a manner that puts them at a further disadvantage.

At the same time, I strongly encourage you to resist any solution that would result in passing the cost of implementing the outstanding recommendations to currently serving Canadian Forces members. Given that the original problem was created by government policy and legislative action, it is incumbent on the Government of Canada to assume the cost of resolving it. Passing the cost on to currently serving members would also be unfair since, under the New Veterans Charter, those Canadian Forces members applying for disability awards after April 1, 2006, fall under its provisions, and do not stand to benefit from the implementation of the outstanding recommendations concerning disability pensions given under the Pension Act.

I urge you to look at all reasonable solutions that may be available to finally address and resolve this fundamental unfairness. In this regard, I would be happy to discuss with you any options that may be available, in order to ensure that these disabled veterans are compensated for their past loss of income, and that the practice of reducing SISIP LTD by disability pensions under the Pension Act is ended for good.

IV. Conclusion

I would like to conclude by summing up my rationale for urging you to implement the outstanding recommendations:

  • The deduction of Pension Act benefits from SISIP LTD benefits is unfair, as the disability pensions paid out under the Pension Act were intended to compensate Canadian Forces members for pain, suffering and loss of enjoyment of life experienced as a result of service-related injuries, and not to replace lost salary.
  • Treating the Pension Act disability pensions as income, which serves to reduce amounts paid out under SISIP LTD benefits, creates a serious inequity by denying those who need it most and those who deserve the highest degree of protection – Canada’s disabled veterans – the full benefit of a compensation plan intended to assist those who suffer injuries as a result of military service.   
  • The group of individuals affected by this inequity is finite, as a result of the implementation of the New Veterans Charter and of the changes it brought to the way in which Canadian Forces members are compensated for injuries.
  • Our recommendations in Unfair Deductions From SISIP Payments to Former CF Members have the support of veterans, veterans associations, a former Minister of National Defence, the former Standing Committee on National Defence and Veterans Affairs, and, most significantly, the House of Commons as expressed in the motion that was passed on November 7, 2006.

The two outstanding recommendations contained in our special report must be implemented: now is the time to rectify this fundamental unfairness faced by injured Canadian veterans.

Please be advised that I intend to make this letter public as I committed to doing when I appeared before the Standing Committee on Veterans Affairs in November 2006.

Yours truly,

Yves Côté, Q.C.

c.c. General Rick Hillier, Chief of the Defence Staff
Mr. Ward Elcock, Deputy Minister of National Defence

Att: October 26, 2005 Letter to Defence Minister Bill Graham

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