LTD, EI sickness benefit, and CERB

Disability Insurance
1

I’m a little confused with what’s happening with the EI sickness benefit and CERB. My dad was injured after Mar 15th, and applied for EI sickness benefit (his employer does not have short term disability benefits). Normally, this would provide him with 15 weeks of EI, after which he would transition to his employer’s long term disability coverage. However, his EI sickness benefit was automatically switched over to CERB when he submitted the claim. We’re now told that he is entitled to CERB for the entire 28 weeks, AND he’s still eligible for the 15 weeks of EI sickness benefit after CERB runs out. This is the guidance we found, which confirms what we were told by Service Canada:

You are unable to work because you were diagnosed with a serious illness. You were eligible for EI sickness benefits after March 15th

You may be eligible for the CERB.

If you stopped working and are eligible for EI sickness benefits after March 15th, you will automatically be processed for the CERB.

You may be eligible for EI sickness benefits if you are still sick after the CERB.

https://www.canada.ca/en/services/benefits/ei/cerb-application.html

I have a few questions:

  1. Is our understanding correct in that he’s eligible to receive CERB, as well as LTD payments? I read similar posts on this topic, which seem to suggest the answer is yes, as long as we are rock solid on his eligibility for CERB. Wanted to confirm this.

  2. The LTD provider (Manulife) is asking us to report any income received, so that it can deduct from its disability payments. I’m guessing CERB would be reportable? Or should it be excluded because it’s not a sickness benefit?

  3. I understand that CERB is taxable, but LTD payments are not. I’m guessing the LTD provider wouldn’t simply deduct the gross CERB amount from its disability payments? Otherwise, my dad would effectively be paying tax on a portion of his LTD payments. If they deduct the after-tax CERB amount, how would the insurer calculate the after-tax amount to deduct if this isn’t calculated until tax time?

2

I don’t know about 1 or 3.

What is deductible under 2 will depend on what your dad’s LTD policy says is deductible. My policy lists specific government programs that wouldn’t include CERB. Other people have more generic language that might include it. I believe the advice is to over-disclose, tell them he is getting it but you understand it isn’t deductible. If they say it is deductible ask them to point out the specific language they are relying on. That’s because if you’re wrong it doesn’t hurt you by becoming fraud and it preserves the impression that your dad is being straightforward and honest which will help him in the long run.

For 3 note that LTD payments are taxable if your employer paid the premiums and non-taxable if the employee paid for them. CPP Disability benefits are always taxable.

3

I thought CERB was for people who lost their job due to covid19.

4

Not just - see Who is eligible here: https://www.canada.ca/en/services/benefits/ei/cerb-application.html

I suspect that they broadened it because it was too labour intensive to not just cover everyone in the boat.

5
6

Normally, this would provide him with 15 weeks of EI, after which he would transition to his employer’s long term disability coverage. However, his EI sickness benefit was automatically switched over to CERB when he submitted the claim. We’re now told that he is entitled to CERB for the entire 28 weeks, AND he’s still eligible for the 15 weeks of EI sickness benefit after CERB runs out.

This does not sound correct to me at all. I would be concerned that wires are getting crossed here or someone is misunderstanding the situation. If you Dad qualified for EI Sickness and they substituted CERB (which was a thing they were doing), he would be entitled to the CERB for the length of the EI Sickness Claim. If he was off for sickness, he could not get CERB and then do EI sickness after that. That is not in line with the intent of the program — IF you are saying your Dad’s original reason for stopping work was because of disability.

Based on what you are saying, I have big concerns that somewhere along the way that someone at Service Canada go the idea that your father was off because of COVID 19 and not illness. Again, government phone agents handling these CERB claims don’t always knwo what they are doing. They will often stretch things to “help” people qualify, but when you are dealing with a disability claim, that causes major problems.

That last part you mention of being eligible for EI Sickness after CERB is not true. You can get Regular EI after CERB but not EI Sickness, if the original reason for leaving work was due to disability and not not because of COVID-19.

Is our understanding correct in that he’s eligible to receive CERB, as well as LTD payments? I read similar posts on this topic, which seem to suggest the answer is yes, as long as we are rock solid on his eligibility for CERB. Wanted to confirm this.

– No, a person cannot get CERB and LTD unless it is a very rare situation. Based on the information above, very unlikely that would apply to your father, but we would need a lot more context and info to say for certain.

The LTD provider (Manulife) is asking us to report any income received, so that it can deduct from its disability payments. I’m guessing CERB would be reportable? Or should it be excluded because it’s not a sickness benefit? -

You should tell them you are getting CERB, but this is not income per se. You. will have to pay the CERB back so this is why LTD insurers don’t deduct it. If in some rare chance you were entitled to CERB they might be able to deduct it from what they pay, but that would depend on the policy. 99.9% of LTD recipients will not qualify to have CERB (even. if it was paid to them), so eventually they have to pay CERB back to Revenue Canada.

I understand that CERB is taxable, but LTD payments are not. I’m guessing the LTD provider wouldn’t simply deduct the gross CERB amount from its disability payments? Otherwise, my dad would effectively be paying tax on a portion of his LTD payments. If they deduct the after-tax CERB amount, how would the insurer calculate the after-tax amount to deduct if this isn’t calculated until tax time?

– I have answered this one. Most likely your father simply has to pay back the CERB. LTD is not going to deduct anything.

I hate to alway be the bearer of bad news but the CERB is the biggest mess I have seen in my 15 years because of how poorly it has been communicated to people receiving disability benefits. In a situation like this, you should be preparing to pay back all of the CERB after the 15 weeks period that EI sickness would have applied. That 15 week EI Sickness period is the likely the only CERB.

The bottom line is that – other than the 15 week EI sickness exception – the CERB is ONLY only for people who are out of work because of COVID-19 – lost their job, got laid off, etc. If you are off of work due to illness (not related to COVID-19 virus), then you do not qualify for CERB.

I don’t know your full situation and I am giving general advice here. We can do consultations to give more specific advice, but I am saying in 99.9% of situations you cannot get CERB and LTD or CPP or STD.

David Brannen

Disability Lawyer with Resolute Legal

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