CPPD Impact on non taxable LTD payments

Disability Insurance
1

My Policy of Insurance for LTD identifies my eligibility for LTD benefits equal to 60% of my gross salary, non taxable.

I have applied for CPPD as per the requirements of the insurance contract.

CPPD is taxable and the insurer will recover the pre tax amount and my LTD will be reduced by this amount. Therefore, if I am approved for CPPD I will be negatively impacted financially by this approval.

I questioned the Insurer about this as I will not receive the 60% as per the policy wording should I be approved, they provided me with a copy of a 2023 BC Civil Resolution Tribunal decision as this is what they are relying on,

Estate of Kerry Alexander Winkler, deceased v. PBC Health Benefits

Are they correct ?

2

Can you provide a link to the case you have mentioned?

Regardless, I believe most LTD policies use the term “gross” when referring to applicable offsets to your LTD payments. Under generally accepted accounting principles (GAAP) this would mean your CPP Disability payment offset will be calculated before taxes.

3

Thank you,

1 Like
4

You can also apply for the disability tax credit so the government credits you back taxes at the end of the year.

5

Yes, they are.
It negatively impacts you financially getting CPP-D but I think it makes your claim stronger.

6

I recently qualified for CPPD was told expect a letter 4-6 weeks. So my question is if my CPPD goes up with inflation does the insurance company claw the increase back? If so it literally traps me in a set income til I’m 65. No room for inflation increases and now I’m making less paying taxes. I need to research further if I can retire while on CPPD. Looking into forum for that information. I’ve saved my whole life and now, with this income, I can’t even cash out any rrsp without risk of clawback. So much for any bucket list trips before I have zero mobility and zero quality of life. Seems very unfair as I’ve paid my dues to the insurance company for coverage and cpp my whole life. Any ideas if there is a way to try and improve financially as I am unable to work. And not likely to return. I’m about to turn 58.

7

Depends how your policy is worded.
Increases to mine are not clawed back and I think that is fairly normal.

At 65 CPP-D converts to regular CPP.
CPP will be lower than CPP-D.

That is not usually clawed back.

8

Hello, I will look into my policy to double check the RRSP part as when I asked if I could cash out a small amount to do a bathroom Reno walk in shower and a short ramp for my electric chair the insurance person told me that it would affect my payments.
I really appreciate reading your answers to a lot of the questions in the forum. Thank you for taking the time to answer mine.
Take care.

9

Hi, I have yet to see an LTD policy that allows an insurer to claw back RRSP withdrawls.

10

Thank you I will definitely dig deeper into what the insurance company representative told me I could not. Really appreciate everyone’s help!

Kind regards

11

Ask the insurance company to show you the wording in the policy that says they can claw that back.
Mine says they can claw back payments for the same disability…blah blah blah.
Something like that.
Do you have a benefit booklet you got from the employer that is a summary of the policy?
You probably spoke to a front line call center person that has no clue.
Make them prove it to you or just do it and don’t tell any one (you didn’t hear that from me :-)).