Typically, how does LTD handle offsets, especially if they are more than the LTD. Is LTD usually cancelled? FYI: Did you know that CPPD does not consider severance as employment income and therefore it is not deducted. I also found out that CPPD remains the same until you turn 65 even though you may take your work retirement pension early.
LTD insurance companies will look at the income source to determine if it is a direct or indirect offset from the LTD benefits they are paying a person. Assuming that the amount of the offset exceeds the amount of the LTD disability payment, then the LTD insurer would no longer have to make the payment, but the person would continue to have an “approved” LTD claim. This is important because if the offset ever went away, then the insurance company would have to resume LTD payments. We see this happen with Workers compensation benefits sometimes offsetting the entire LTD Payment, but then years later if the Workers compensation payment is reduced, the LTD insurer may have to re-start full or partial payments.
David Brannen
Disability Lawyer with Resolute Legal
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Thanks so much for your information David - very helpful. Right now it is a waiting game.
Hi David
Just one more question. What are examples of indirect vs direct offset?
There are no standard direct and indirect offsets. Those are something unique to each policy. A direct offset in one policy can be an indirect offset in another. There is no essential difference between the two, only the formula for how the are applied to determine if there is an offset. Direct offsets are directly subtracted from the LTD payment amount, whereas indirect offsets use a more complicated formula.
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Thank you again David!