Formula for payback?


#1

Hello, looking to see if there is a standard formula that insurance company (Great West Life, BC) uses to determine payback of CPPD lump sum payment? Looks like they are double dipping to arrive at a much higher amount than they are actually due??


Insurance troubles re: reinbursement - need to vent
#2

Do you mean when they estimate how much it might be?
Some estimates are lower than what you will get and some estimates are higher.
I don’t think there is a standard formula.


#3

There is no formula per se. It is typically a dollar for dollar offset under most LTD Policies. Look at the months that the retroactive CPP payment covers. If you got an LTD payment during any of those months, then the LTD insurer is entitled to be paid back an amount equal to the total CPPD payment for that month. This is generally how it works. There may be differences depending on specific wording of your LTD plan.


David Brannen

Disability Lawyer with Resolute Legal

The response posted above is based on the limited factual information made available and is not intended as a full and complete response to the question. The only reliabile manner to obtain complete and adequate legal advice is to consult with a lawyer, fully explain your situation, and allow the lawyer enough time to research the applicable law and facts required to give an adequate opinion. The basic information provided above is intended as a public service only, a full one-on-one discussion with a lawyer should be done before taking any any action. The information posted on this forum is available to the viewing public and is not intended to create a lawyer client relationship with any person. If you want one-on-one advice, please click here to request a free consultation or call toll free 1-877-282-5188 to speak with a member with our disability claim support team.


#4

Thank you for the responses!
Because the insurer is not using a dollar for dollar system, I am wondering if there is some other “normal” system. Instead of taking the difference between LTD monthly payment & CPPD monthly payment, they seem to use totals only and this creates a difference of +/- $3,000. Just wondering if this is normal.


#5

If your LTD benefits are non-taxable you should ensure that the insurer deducts only the net amount you receive from CPP. Most policies are silent on the issue of whether the LTD insurer is entitled to deduct the net or gross amount of the CPP disability benefit. There is an Ontario Court of Appeal decision, however, which strongly suggests that the LTD insurer is entitled to deduct only the net amount received by the disabled person.If your insurer is insisting on deducting the gross amount of the CPP benefit from a non-taxable LTD benefit you should speak to a lawyer to see whether the insurer’s position is correct.

Bapoo v. Co-Operators (1997) CanLii 6320 (ONCA). This case dealt with an automobile insurance policy; however, the same principles should apply with LTD claims.


#6

I don’t pay taxes on my LTD payments. In case I receive CPP-D back pay will my insurer be entitled to receive everything or just net CPP-D after I pay taxes to CRA?There is nothing about it in my policy.


#7

An Insurer is going to try and say that they deduct the gross CPP-D. You are going to say net of taxes. To my knowledge this issue has not been before the courts, likely because the amounts involved are not that large to warrant a lawsuit just on that issue.

In my husbands claim since GWL misrepresented the policy and had him apply for CPP-D when he was not required too and knew we objected to applying-that they can not rely on the policy to offset the CPP-D. In my husbands case he was the very tiny percentage of Insureds where applying for CPP-D was just exchanging a non taxable benefit for a taxable one–and costs him money. ( His policy is only a 5 year term and is non taxable) We would have been better to wait.

If the court rejects that then in the alternative we would argue net after tax CPP deduction.

The case referred to (Bapoo) https://www.canlii.org/en/on/onca/doc/1997/1997canlii6320/1997canlii6320.html

The purpose of the offset “was meant to eliminate double recovery in the receipt of weekly income benefits, it was not the intent of the legislature to penalize insured persons who receive collateral disability benefits. He states that the deduction of gross collateral benefits, which are nonetheless taxable in his hands, in effect penalizes him since he ends up with less money than he would otherwise have in the absence of any collateral plan.”


#8

In my case most probably I won’t pay tax on CPP-D retro or regular payments as the amount is not high enough to get into tax territory. I’ll mention net CPP-D to my insurer. If it doesn’t work then it is not worth while hiring a lawyer.


#9

I agree–for us it hurts because my husband as not taxed is a great deduction for me and I get the care giver–now that he has CPP-D --I lose all that


#10

I’m pretty sure that will be my situation, I will find out next year.


#11

If you have children’s payments including, it may be that they are using the all-sources income integration calculation…I did forget to mention that. It could result in higher deductions because children cpp payments included.


#12

Kaki, you can request your claim file from GWL and it will show there how they are calculating the payments.


#13

Thank you again for all the responses!
there is no childrens payments involved.

I did ask for a break down of their process and it was as follows:

total amount paid by insurer LESS amount of CPPD lump sum payment = what insurer should have paid me

THEN:

total amount paid by insurer LESS what they should have paid = what I owe them

In my thinking, they should be paid the 1st amount and not the second amount as what the total I owe them is more money than what I made from them.
Again, my thinking was that what they paid me less what CPPD pays PER MONTH should be the difference(and not the 2nd formula they use)??

Is this just wishful thinking on my part?

Thank you again


#14

Unless the can produce a part in the policy which sets out these so-called formulas, then they are only entitled to a month-by-month offset. You literally get a calendar and count back the months you got an LTD payment and the months covered by the CPP retroactive payment, and they are only entitled to reimbursement for the months that overlap. Also…and this is important…under most LTD plans they ARE NOT entitled to the benefit of any annual increases in the CPP disability benefits amout, so this means for all your offset calculations you use the original CPP amount as the monthly deduction amount. So if your CPP goes back to 2015 and the annual amount was $850, then that is the CPP amount you use for ALL offsets.

So you do it like this:

LTD Benefit Amount …$1500
Less Original CPPD Amount… $850
Equals the Amount they should have paid…$650

Then you simply do up an excel spreadsheet with four columns
Month | Amount Paid | Amount they should have paid | Overpayment
Month 1 $1500 I $650 | $850
Month 2 $1500 | $650 | $850
Month 3 " " "
etc

Cover all the months where they paid the full 1500 but should have paid the 650. then add up the overpayment column and that is what they are entitled to. Remember for purposes of of this offset your CPP amount says at 850, even though the years that followed it increased for inflation adjustment. This is meant to be a general illustration but should give you the idea of how this works.

There may be something special about your plan that makes what they are doing correct, but this is the formula I use during litigation when calculating offsets owned.


David Brannen

Disability Lawyer with Resolute Legal

The response posted above is based on the limited factual information made available and is not intended as a full and complete response to the question. The only reliabile manner to obtain complete and adequate legal advice is to consult with a lawyer, fully explain your situation, and allow the lawyer enough time to research the applicable law and facts required to give an adequate opinion. The basic information provided above is intended as a public service only, a full one-on-one discussion with a lawyer should be done before taking any any action. The information posted on this forum is available to the viewing public and is not intended to create a lawyer client relationship with any person. If you want one-on-one advice, please click here to request a free consultation or call toll free 1-877-282-5188 to speak with a member with our disability claim support team.


#15

Hi Kaki

Perhaps income tax withholding might be causing the confusion. Here’s a scenario with simple numbers for you to consider.

GWL has been paying your LTD claim of $2,000 per month and you have been receiving $1,400 in your bank account because GWL withheld income tax and submitted the tax to Revenue Canada on your behalf (just like your employer used to do). At the end of the year when you received your tax slips and filled your income taxes, you reported $2,000 per month of gross income and $600 of tax withheld (plus you reported all of your other income and deductions).

You recently filed a CPP disability claim and were successful. You have been awarded 10 months of CPP-D back pay of $1,000 per month, totalling $10,000. The full $10,000 was sent to GWL. It sounds like GWL is getting too much because they are getting more than they even paid you (shouldn’t they only get $700 for each of these 10 months!?!?!?). No, they should get the full $10,000 per month because they paid $700 to you and $300 to Revenue Canada which you got credit for on your taxes last year (or will get credit for when you file your taxes this year - this $300 per month is in your Revenue Canada Tax Account under your Social Insurance Number).

If this sounds like the scenario, I think you are OK and it will work out as you will still get credit for the approximately $3,000 difference you refer to if it is withholding taxes.

Joanne


#16

Is caregiver amount deducted from LTD? Do they consider family income or just your husband’s income?


#17

Make sure for this calculation they use only CPP-D amounts that overlap with your LTD months. If you received CPP-D for any months you were not on LTD then those payments should not be included.


#18

I am referring to filing taxes with the CRA. Before getting CPP-D my spouse had no income reported to CRA. I could claim him as a dependent and there is also a Family Caregiver Amount that boosts the deduction by another 2100.

Now that he gets CPP-D I can no longer claim him and he is now above the Caregiver amount too. So I will lose about 3000 in income tax refund! My pharma care deductible will also be higher,

In our case by getting CPP-D it will cost us about 4200 a year when I figure in getting the tax credit.

Hopefully we can get back that loss via his lawsuit. It would have been better for us to apply later as his Insurance is up in 3 years


#19

Thank you David,
This is what I though also but I am finding it quite difficult to find a lawyer to help me out - would you by any chance know of any employment lawyers in and around Vancouver? I am not sure if I can go to the insurer and say this is what you’re getting and that’s that - I do very much appreciate that I was paid and I have no problem paying back what they are fairly due but I am not thrilled that they can demand all of the lump sum plus more! I did ask for our “plan” from my employer but I did not see anything about repaying CPPD (nor even having to apply for it). Thank you again for your explanations & time!


#20

My benefit booklet says:

for the same or a subsequent disability under any government-sponsored plan

If you are eligible for any of the income amounts above and do not apply for them, we will still consider them part f your income. We can estimate those benefits and use those amounts when we calculate your payments.

I think that is the part that means CPP-D.

If you receive any of the income amounts above in a lump sum, we will determine the equivalent compensation this represents on a monthly basis using generally accepted accounting principles.