Is CPP deducted from CPPD monthly benefit payments?

Hi there,
I recently was approved for CPPD, and my LTD payment was reduced as such. The administrator of the LTD benefits advised that because I am now receiving CPPD benefits, they will no longer deduct CPP from my LTD benefits (they are taxable). I thought you could still contribute to CPP so the amount you receive when you retire is increased. And how do I get CPPD to take CPP off my monthly benefit? When I went to do the voluntary tax deductions through myservicecanada, they only listed federal tax. Also, what percentage of tax should be deducted from your CPPD, in general of course. Thank you.

Hi, CPPD benefits are not subject to CPP deductions. You will get some benefit towards your retirement CPP for months that you are on CPPD.

Depending on when you went off on CPPD, here is the general idea of how it works - don’t quote me on the specific details :slight_smile:

Under the old system your CPP benefits are calculated by dropping a certain percentage of your lowest income months from the calculation, and your CPP amount was based on the average of the remaining higher-paying months. Months that you were getting CPPD were also dropped from the calculation, so that they didn’t count as zero income months against you.

Under the new system (I’m not even sure if it’s in effect yet?) if you started receiving CPPD after it came into effect, then while you are on CPPD you will continue to earn CPP credits for 70% of what you earned before you became disabled.

This change helps people who became disabled before they were able to accumulate many CPP credits.

2 Likes

Oops I didn’t answer your other question. For the taxes I use this calculator to get a rough idea of how much tax I will need to pay. My CPPD goes under “other income”.

2 Likes

Apply for the DTC (Disability Tax Credit) which will lower your tax payable.

Thanks for this info, very helpful.

I have applied just have to wait now. Thank you.

Are you sure the LTD insurer was previously deducting CPP contributions from you? I suggest going back and checking that paperwork. Is it income tax that they were in fact deducting? Once you get CPP-D, the time you are on CPP-D counts towards your CPP Retirement Pension which is good as you will get a better pension. During the time you get LTD benefits only (and not CPP-D) that time does not count towards your CPP Pension and lowers your pension.

My employer issues my Sunlife LTD payments every two weeks and they were deducting all taxes, federal, EI and CPP.

Do you know how CPPD counts towards the retirement pension? What part of the CPPD counts towards or is it just years based off the last amount of a certain amount of years you were paying CPP?

Oh never mind, Caro answered my question above.

Thank you

I forgot about Caro’s answer, so all good.

This is the gist of CPP as far as I can tell … there are 48 years between the time of age 18 to age 65. That means you could be working for these 48 years. (I am going to ignore starting CPP retirement pension early at 60 or late at 70). Just look at the vanilla scenario. CPP then says, well, you may have had some years where you did not earn a lot, maybe you were a student and working part time or may be not at all … maybe you did not get paid a lot earlier in your career etc etc. So, they say, let’s knock of 8 years. Let’s look at a working life span as 48 - 8 = 40 years. CPP contributions have a max each year after which there is no more contribution allowed. Say you have a 40 year history of paying the max CPP contribution … you would then get the max CPP pension. But let’s say for some reason you worked only 35 years, and at the max CPP contribution. You took 5 years off to travel and have fun and did not work. 35/40 = 87.5%. CPP would say you get 87.5% of the max pension, not 100% because you lose some pension for the 5 years you did not work and contribute. But say it is a different scenario, you did not take 5 years off to have fun, instead there were 5 years you were disabled. So, instead of 35/40 = 87.5% … CPP will instead say, that they won’t count the 5 years you were disabled and they won’t hold it against you. They’ll adjust your “working career” from 40 years to 35 years. So you’d get 35/35 = 100% CPP pension assuming all the other years were at max CPP contribution. Even though you did not contribute to CPP during the 5 years you were disabled, they will give you credit for that time. It is almost like they will “pretend” you did contribute during those 5 years. Now in 2019, I think some calculation rules changed in how they give this “credit” but the gist of it is to not hold that time against you. This is how “I think” it works.

HOWEVER, I don’t understand your situation. You say they are deducting EI premiums and CPP contributions from your LTD payment. I don’t understand this. My explanation above assumes no CPP contributions during the period of disability. Say you are receiving LTD payments for 1 year. If you applied for EI after that time, I don’t think you would get EI benefits because you would not qualify … you would not have the “worked hours”. So I don’t know why you would have to pay the premium. I could be totally wrong, maybe others have these deductions too, but I do not. And my insurer not deducting them from my LTD payment makes sense to me. There also may be a difference in deductions on STD vs LTD. Maybe on STD there are deductions.

1 Like

As a general rule you cannot receive benefits from CPP program and pay into it at the same time.


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 reliable 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 1-877-917-7050 to speak with a member with our disability claim support team.

Hi there, my employer was issuing my LTD payments for the insurer so I was getting my taxes deducted every two weeks. When I was approved for CPPD, my employer noted that they will administer the original LTD amount less the approved CPPD amount, for the lifetime of my benefits. After I received my CPPD back pay and gave it to the employer they advised that they will no longer be taking CPP off my LTD benefits. So I now understand the whole process.

This makes sense.

This doesn’t make sense.
The CPPD back pay is to cover the period of LTD when you didn’t have CPPD yet.

Going forward your LTD will be reduced by the CPPD amount.
You will get LTD and CPPD but it will total to the amount of LTD before you have CPPD.
This is what happened to me and I suspect it is common.

I should have clarified - after my Original LTD was reduced monthly by my CPPD backpay. The balance of my LTD payment which is issued by my former employer, does not have CPP deducted from it however it DOES still take off fed taxes AND EI.

If your LTD is taxable then taxes make sense (you may be able to get less tax taken off if you have the DTC (Disability Tax Credit)).
EI deducted doesn’t make sense to me.
Maybe @David_Brannen has heard of this.

Exactly, I do not understand why they would take off EI unless its mandatory for all income to, at minimum, deduct EI.