Source: The Canadian Press

The federal government has suspended a new provision that could deprive vulnerable senior citizens of benefits designed to keep them above the poverty line.

Human Resources Minister Diane Finley said she was concerned about the impact on seniors from a 2010 change on rules governing lump-sum withdraws from registered retirement income funds, known as RRIFs.

“I have instructed departmental officials to immediately put a hold on this policy while we review it completely,” she told the Commons on Friday.

“I have also instructed officials to contact those individuals affected directly so that their applications can be reviewed and evaluated for eligibility under the old policy.”

A spokesman for the minister said the changes came about as a result of a 2008 tax court decision. Starting this May, the government began including discretionary lump-sum withdrawals from RRIFs, sometimes made for emergencies, as income for tax purposes.

As a result, low-income seniors could be pushed above the $15,815.99 minimum threshold to qualify for Guaranteed Income Supplement payments under the Old Age Security Act.

Depending on the size of the one-time withdrawal, seniors could lose some or all of the $658 monthly GIS benefit in the following year.

About one million seniors receive the income supplement, although the changes likely impacted “only a few thousand,” said Ryan Sparrow, the minister’s director of communications.

Finley stressed that individuals impacted by the changes in the regulations would be treated under the old rules while the review is being conducted.

That was not enough for opposition MPs, who accused the government of enacting the changes without prior notice or consultations.

Liberal MP Gerry Byrne said the government’s action is a stinging slap against seniors at a time when an advocacy group calculates the poverty rate among the elderly jumped 25% during the recession.

Byrne added that officials may not know who to contact because the change applies to this taxation year and the impact on GIS eligibility won’t be felt until 2011.

“What needs to be given by the minister is that she made a serious error in judgment, that she radically changed the rules affecting seniors’ pensions in this country and that she needs to reverse herself,” he said.