Severance and LTD

#1

I don’t want to beat this subject with a stick but I still am not clear about a few things.
#1: I am on LTD & past the 2 year mark and am on CPP-D. My company will be sending me a letter soon re: frustration of contract and with that is a severance package. If I get a lump sum how does the insurance company offset that from my LTD monthly payments? (My policy clearly states they can offset Severance) Severance is for payment going forward not like CPP-D where they give you retro active lump sum and that goes to the insurance and then the max allotted amount per month is split between the two.
#2: Is CPP-D impacted by Severance?
#3: If I decide to close off with LTD, do I get to keep the Severance or does LTD still get it?
#4: I am about 2.5 years away from turning 65 so depending on how much I get for Severance and how it is offsetted by LTD if I remain with them, it may be helpful to do this or not. If my Severance as an offset will take me close to 65 anyway, what is the point of having LTD again and will they even start back up with me to cover the bridge between the time left and when I turn 65?
How complicated would that be?
#4: If it is okay to close off with LTD and keep the Severance, can I start my early retirement shortly afterwards or is there a wait period due to receiving a Severance.

Thanks for your support on this topic.

#2

Unfortunately, your questions are too specific to answer in context of general information on the forum or as a free consultation. You really need to seek specific legal advice because of the implications. There is no general answer for your situation, it will depend a lot on your specific work situation, any applicable collective agreement, your employee pension plan rules and your group disability policy. Too many moving parts for anyone to answer your questions without having a good chance of getting it wrong. The answers could be yes or no to all of your questions depending on the factors above. Unless you are speaking with a co-worker, who has been through this and has the same LTD Plan, Pension Plan and Collective Agreement, I would be very cautious on relying on the experience of others because there are too many variables involved.


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 1-877-282-5188 to speak with a member with our disability claim support team.

#3

#1. My guess would be that that the insurance company going forward doesn’t pay you until the total monthly payments have become greater than the amount of severance.

#2. CPP-D is not affected.

#3. I don’t think the insurance company would sue you to get it so it is probably yours.
I think you need legal advice but I would wait until you you know the amount of severance.

You have two #4s. :slight_smile:

#4a. No idea what they will do after 2 years.

#4b. I doubt there is a waiting period. Do you have a defined benefit pension plan?

#4

Thanks David and Jammer!
Yes Jammer I do have a defined retirement pension and am non-union.
I am hearing you David. I guess I keep thinking this should be more simple than it is turning out. The problem in our policy is that the details are missing. For example, how something is offset. It seems that this whole process from getting STD & LTD etc is one big secret which is not fair to the consumer. It seems that you get a little information let out at a time when it is convenient No wonder people have a lot of questions, are confused and anxious. The big problem here is that if you don’t ask or know to ask the RIGHT questions and you can’t afford professionals you are sunk. Most of us are on very reduced income. People have a right to be well informed and have someone connected to these insurance programs to inform them (verbal and written) without fear of repercussions. I guess I am also naive - the world is never fair. As I go thru this whole process I become more disalusioned Maybe I will write a little booklet and get someone who is unionized to do so as well for our particular agreements. I know David that you have done some good work i.e. the CPP-D booklet/Webinars, responded to general questions/this forum and that has been so helpful to others. But I believe that we have a right to know the facts without being concerned that it will raise red flags! I am just feeling frustrated, confused and anxious because I want to be able to make some realistic, sound decisions ahead of time based on the potential options and the facts. The income we receive is our safety net - so very important.
Sorry for the vent. Thank you.

#5

Yep.
I had to ask my insurance company if they were going to try to offset my yearly bonus.
The policy didn’t say and I had to be prepared to have a legal fight (or give up the money) just for asking.

The earlier you retire, the less income you will get.
The exact amount/formula is hopefully spelled out.
Hopefully you can still log in to work or you have copies of the documents about your pension (or can ask a coworker :-)).

#6

Thanks Jammer. I plan to do that.

#7

Don’t tell them about your severance! I think There’s a good chance they won’t find out. I’m sure after 2 yrs they are are no longer in contact with your employer.

#8

If your benefit booklet doesn’t list it as an offset then don’t tell them.
If it does and you’re comfortable with breaking the law and know that you will never have to sue them for anything then it is your decision.

#9

I’m not saying this because I have done it. I don’t think they will all of a sudden ask about a severance if they don’t know. There are privacy rights and if my employer passed on any info to them they would be in breach of privacy law. If I had less then 2 yrs left of LTD coverage due to my age, I would probably take the chance and not tell them as long as my severance could cover me for that time. Just saying. We all get screwed some way while they are sitting on billions.

#10

Thanks for your feedback. I am going thru proper channels to help me out with this.

1 Like
#11

LTD carriers communicate explicitly to claimants that they MUST report income and any work performed (whether paid or unpaid to you or any other person or party as a result of work performed by you). This direction is contained in the initial letter to the claimant approving the LTD benefit and at every opportunity the LTD has to remind claimants that they must report income. In addition, the LTD claimant usually signs a form on a regular basis with their medical updates/activity forms attesting to their ongoing status. The LTD carrier doesn’t rely on heresay or word of mouth. This is serious business.

When you don’t tell your LTD carrier about income (i.e. employment income, severance, a business you are working in, etc.) you are committing a serious offence.

Jammer - as always, you are a very diplomatic and supportive person. I usually try to be diplomatic and supportive… This time, I’m choosing to be undiplomatic - blunt - and I might be “voted off the island for this one”. Many honest, legitimately disabled people entitled to the LTD benefits specified in their contract are run through the ringer by insurance companies in an attempt to weed out those few claimants who are scamming the system in one way or another. Deciding NOT to declare severance pay while your are actively collecting LTD benefits when you are fully aware it is an offset is committing insurance fraud. Most people can’t live with the idea of committing fraud. For those few comfortable with committing fraud - the best outcome of getting caught would be getting cut off LTD. The worst outcome would be… well, I think you can probably figure that out and you would not need to worry about paying rent or buying food. Actually, the same scenario applies to workers compensation, employment insurance and any other type of insurance claim.

By the way, employers and LTD insurers are in regular communication about employees on claim as they are a very large cost to both the employer and the insurance company.

Kellyann - I strongly disagree with your advice.

1 Like
#12

Hi everyone
First of all I want to make it very very clear that I have NO INTENTIONS of doing anything that would be considered dishonest over fraudulent!! That is not who I am!!
In fact my insurance carrier since being on LTD has actually been quite good and I have had no problems with them and don’t intend to. What I am doing is seeking out legal advice and doing some research around the actual policy and the wording etc and negotiating hopefully.

I know everyone is trying to be helpful with the knowledge they have at hand but I have looked into my issues with some good legal help. As David has mentioned on a number of occasions, some issues are far too complex to be dealt with on this site and there are “too many moving parts” and cautions around the advice i might get.

My only initial concern around seeking legal advice was the cost and I am sure many people may be in the same boat when suddenly finding themselves on a very restrictive income. I am very fortunate to have found someone who is willing to work on a contingency basis.

Thank you and Take Care!

2 Likes
#13

I wouldn’t be worried about that.
I would be worried about the insurance company knowing the employer usually pays severance.

#14

I think mine says “employment income”. :slight_smile:
I got a yearly bonus for the year before I went on LTD.
I didn’t know if it was an offset so I asked the insurance company.
There was no harm for me asking because it wasn’t a lot of money but I can see why asking about severance might be a problem.
I would not want to sue if I disagreed with the insurance company.
My insurance company has been pretty good but I can seen all the ways it could have gone badly.
It can still go badly at any time.

#15

Depends on the reason for severance I guess. There is no reason for anyone to retire while on disability and no one can be forced to do so. If it were me I would wait til (65) to retire and LTD was no longer being paid. If severance is being paid to sever employment while on disability then I’m not sure why the insurance company would “know” unless the employer informed the insurance company. So then privacy laws come into effect and also wether the employer has done its duty to accommodate and if they can prove hardship to keep the employee “employed” while they are disabled and off on disability. That’s just my understanding of all this. I could be wrong. Seems to me it’s a human rights issue to terminate while on disability.

#16

It’s legal.
An employer can terminate for “frustration of contact” while a person is on LTD.
The usual time is between 2-4 years so the employer has less chance of losing a wrongful dismissal lawsuit. Some employers never terminate employees. Some terminate before 2 years, some after 4. Each situation is different.

Some people retire before 65 if their pension is as good or better than LTD (government).

#17

It’s Simple, your employer cannot force you to collect severance and if they push the issue it’s there job to prove they have undue hardship …it look like they are not suffering from your LTD paid by the private insurer. They can’t force you to sign severance so don’t bother. Your disability is a protected ground but so is your age!!! Actually your age happens to be the best asset, the insurer and employer will be up the A$$ in lawsuits forcing retirement…I can’t believe what they are trying to get away with. Against the law!!!

#18

The employer has to prove undue hardship, they aren’t entitled to frustration of contract without just cause…protected grounds under human rights law in this case are both disability and age, there is no case. They cannot frustrate a contract when realizing the employee is likely not going to return as they reach retirement…they have no grounds

#19

Except in very rare situations (collective agreements, unique term contracts), employers can terminate any person’s employment as long as it is not for a discriminatory purpose. There is no law against terminating an employee who has a disability, or who is on sick leave, you just can[t terminate because of the disability or sickness. This is a fine line and it is often hard for an employer to show that the reason for termination is not because of disability.

Most employers across Canada can terminate employment based on doctrine of frustration of contract. Again, there are always exceptions, but those are unique situations. Termination for cause is done after it is proven that there is no accommodation that can be made. once that is established your work is not protected by human rights laws.

“Severance” is a loaded word that means many things to all people. All provinces mandate a minimum level of severance pay (called termination pay or severance pay) that is usually a number of weeks of pay, based on the number of years worked for the employer. Both Alberta and Ontario have these laws under Employment Standards Legislation.

Depending on the wording of the employment agreement, that may be all that is owed. If the employment agreement is not specific about severance pay, then the common law rules apply. The common law rules for severance are what most people think about when they think about severance pay. What you are being paid for is proper notice of termination. The employee has a right to notice of termination, and that notice period can be a month or a year or more depending on many factors. You often hear that common law severance pay is one month for every year worked, but it is not as simple as that. The common law severance rules do not apply in union workplaces.

It is a condition of the insurance agreement that the insured person notify the insurer of any new sources of income, including severance pay or retirement pay. The insured person has a good faith obligation to notify the insurer and is in breach of he policy if he or she does not. This is an area where you want to be 100% above board and open with the insurer.


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 1-877-282-5188 to speak with a member with our disability claim support team.