Hello David, thanks for your support
I know that LTD benefits may be reduced by direct offset income such as the Canada Pension Plan, Quebec Pension Plan, and Workers’ Compensation, but does that include a company pension income? I am on long-term disability until I turn 65. I am worried that the LTD insurer offset my company pension. The offset section says the following: Under this provision, the person’s income benefit
is reduced by the following income:
Disability or retirement benefits to which he
is entitled on his own behalf under:
(a) the Canada Pension Plan;
(b) the Quebec Pension Plan; or
(c) a plan in another country for which
there is a reciprocal agreement with
the Canada or Quebec Pension Plan.
Benefits under any Workers’ Compensation
Act or similar law except for:
(a) permanent partial disability awards
that were payable for each of the 12
months before a disability period;
and
(b) benefits related to employment with
another employer.
I assume you are eligible for an early retirement, either with our without a reduction for early retirement, and are thinking about retiring to collect your company pension.
If you “retire” from your job to begin collecting your employee pension, your LTD benefits usually end immediately. Check your contract, and it probably says your LTD benefits will continue to the earlier of age 65, assuming you continue to be disabled according to the plan, or your retirement…
If you start collecting your pension, it means you have retired from your job and your LTD automatically ends.
Some long term employees actually do this - they retire and end up with more from their pension than LTD. CPPD benefits are not impacted by retiring. Folks look at what they can receive from their early retirement pension. That amount may even be indexed for inflation, whereas their LTD may not be indexed. The employee may be eligible for retiree health and dental benefits which may be equivalent to their employee benefits (often retiree benefits, if any, provide less coverage). You lose your employee and dependant life insurance when you retire, although a small amount may continue under retiree benefits. You can usually convert up to $200K of life insurance to an individual plan, but that insurance is very expensive as the insurer assumes you are a large risk. If you retire early and forego LTD for your pension, you also stop accruing credit in your defined benefit plan or contributions to a group pension or RRSP, if that was a benefit at all. Be careful about the impact on your company pension if you retire early and your company pension has a bridge benefit for early retirement and the pension plan text says if you collect CPPD your pension/bridge benefit will be reduced by your CPPD amount
If this is where you were heading with your question, it is a good question. I suggest you see a lawyer and also get expert financial advice.
Thanks, Joanne.
You are absolutely right in everything that you said. Yes, the pension not only ends the LTD but even if it does not, it gets deducted from the LTD payments. You saved me, Joanne; I was planning on retiring without paying attention to the retiring clause in the policy. Thanks again and God bless your days
Your company pension is always deducted if it is from the same employer who provides your group LTD. They don’t say it that way and, instead, cover off the scenario by saying your LTD ends if you retire. Insurance doesn’t allow “double dipping,” which means collecting more than you lost. This is why CPPD, WCB, accident benefits, etc. are clawed back from LTD either dollar for dollar or after the level you hit a maximum income level.
I’m following up on our earlier conversation. I am currently on LTD, and my employer has neither terminated my employment nor asked me to resign. To prevent my LTD from being cut off, should I wait for my employer to terminate me? My concern is that if I take the initiative to retire, my company pension might be offset.