Severance pay is a bit of a general term that encompasses many situations, including “pay in lieu of notice”. Pay in lieu of notice is employment income. The employer is simply choosing to pay it out to you in advance rather than continuing to have you show up for work during the notice period. The notice period is the amount of notice an employer or employee must give to end employment.
It would not decrease your CPP disability benefits per se. Generally speaking, CPP disability does not offset income as you see in LTD insurance policies. Rather, with the CPP disability program they care concerned with whether you can perform “gainful employment”, which is defined by regulation as the ability to earn approximately $15,000 (in 2018 dollars).
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