We have experienced a unusual situation this summer. For some seniors, their income has been reduced but their personal care home fees have gone up! How and why did this happen?
Guaranteed Income Supplement
The Guaranteed Income Supplement (GIS) has been reduced for most seniors who have been receiving it the past 12 months. That is because the Canada Pension Plan was increased in January 2023.
The GIS is part of the Old Age Security (OAS) program and is recalculated every July. As of July 2024, the GIS is based on your net income reported on your personal income tax for 2023. And everyone’s CPP income increase by 6.5% January 2023. One of the largest increases we have seen in decades!
So if all of your other income remained about the same, such as interest income or income from your Registered Retirement Income Fund (RRIF), then your net income was still higher in 2023 versus 2022, just because the CPP increased in January 2023.
In the past month, we have had many phone calls from our senior clients wanting to know why their GIS went down in July 2024 compared to just the month before in June 2024. After the first few calls, we realized that almost everyone was affected and for all of the calls we received, it was simply because their CPP was higher in 2023 versus 2022.
It took 18 months to realize what the impact would be on the GIS. Everyone was happy that their CPP was higher January 2023, but only 18 months later, July 2024, did we realize the negative impact it would have on some low income seniors.
Unfortunately, many low income seniors have seen their incomes drop as of July 2024 based on the combined OAS and GIS. And this lower income will remain the same until October 2024.
Every three months, the OAS and GIS normally does see a small increase based on inflation. We will need to wait until October to see how much the OAS and GIS increases.
And then next January 2025, we will find out how much the CPP will increase for the entire 2025 year. The CPP is increased every January based on the inflation rate for the previous year. Unlike the OAS and GIS, the CPP is only increased once a year.
Personal Care Home Fees
The Manitoba Personal Care Home Fees (PCH) are recalculated every August. And the new fees for August 2024 to July 2025 are based on your 2023 net income.
For many low income seniors living in a PCH, their only income includes the CPP and OAS and GIS.
We already know the CPP increased by 6.5% for 2023. The OAS was was increase throughout 2023 every three months. The total increase during the 2023 year was more than 10%!
Since your CPP and OAS increased in 2023, your PCH fees increased effective August 2024. This is a shock to many individuals and their families or those who have been helping them with their finances.
As her legal representative, I look after the finances for a low income senior that has been residing in a personal care home for a few years. Mid-August, I received a courtesy call from one of the administration staff who wanted me to be aware of the large increase to her personal care home fees starting August 2024 for the next 12 months.
That is when I realized that almost all the seniors living in personal care homes in Manitoba will see large increases to their monthly fees. It makes it more difficult to manage the finances when the income has been reduced by the GIS being lower, and yet the monthly costs of the PCH fees are going up.
Many seniors living in PCH may find it difficult to manage the cash flow for the next 12 months.
Looking back at the past 18 months, I realize that my one client in the personal care home did manage to save some money for the past year and a half, because her personal care home fees from August 2023 to July 2024 were still based on her lower income in 2022. And she will need some or all of this saved money for the next 12 months with the higher PCH fees.
The combination of CPP and OAS income increasing in 2023 had an adverse effect on the GIS that will be received July 2024 to June 2025. And the increased income for 2023 will also have a negative effect on the PCH fees charged from August 2024 to next July 2025.
Many families will have some difficulty managing the cash flow of their senior family member living in a personal care home in Manitoba.
Anni Markmann is a professional tax preparer and an independent financial advisor who lives, works, and volunteers in the Ste Anne area. Contact her at Ste Anne Tax Service at 36 Dawson Road, Ste Anne or 204.422.6631 or info@sataxes.ca