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IRB Methodology – How do you calculate an Income Replacement Benefit

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It appears the New SABS (O. Reg. 34/10 – from Sept 1, 2010 to current) have been drafted to bring greater clarity to the methodology of calculating the IRB, based, in part, on conclusions in arbitration decisions at the Financial Services Commission of Ontario (FSCO).

The ordering of the component parts to calculate the IRB appears to be unambiguous and is performed in the following steps (for the first 104-weeks of disability if the individual was less than 65 at the date of entitlement):

STEP 1.    Determine the “weekly base amount” (7.(2)1. and 2.)

Pre-accident gross weekly employment income
Add:     Pre-accident gross weekly self-employment Income
Less:    Pre-accident weekly losses from self-employment

Multiply the result by 70%

Add:    70% of the Post-accident weekly loss from self-employment (losses incurred as a result of the accident)

For additional information on Losses from Self-employment, see our upcoming blog.

STEP 2.    Determine the “weekly amount of IRB payable” (7.(1))

The “weekly amount of IRB payable” is the lesser of:

A = “weekly base amount” (Step 1) LESS the total of all “other income replacement assistance”

B= $400, or limit fixed by an optional IRB purchased ($600, $800 or $1,000)

Other income replacement assistance is defined in Section 4 of the New SABS.

For additional information on this topic, we refer you to our upcoming post.

STEP 3.      IRB Payable Adjustments (7.(3))

Weekly IRB payable (Step 2)

Less:    70% of gross employment income received as a result of being employed after the accident

Less:    70% of any income from self-employment earned by the insured after the accident

Calculating an IRB for an accident prior to September 1, 2010

The pre-September 1, 2010 calculation of an IRB was quite different. For details, we recommend our upcoming blog on the topic. Until then, we are available for questions.

What This Means to You:

What we see as a common error by insureds, adjusters, and law firms is the assumption the policy limit is applied as the last step. The Welsh and Economical decision in 2002 (FSCO A01 B 000916) confirmed this was not correct under the old legislation, and it was again confirmed in Longo and Lombard (FSCO A07-000768). There does not appear to have been any adjustments under the new legislation that would support a change. Therefore, an IRB is no greater than the policy limit, and any post-accident income is deducted from that amount in calculating the IRB payable.

For addition information, or for calculators that will assist you in adhering to these guidelines, please do not hesitate to contact us directly at 1-800-380-7908 Ext ASK (275) or

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