My employer phoned me out of the blue after 7 years on LTD.
I am being terminated.
They said they will pay a severance.
Severance is not mentioned in my policy booklet.
Should I contact the insurance company or mention it on the yearly form I get (ClaimLab)?
The last time I contacted the insurance company about volunteer work (that I ended up not being well enough to to do) it took them 4+ months to get back to me.
Should I try to let Service Canada know or explain the income after/if they cut me off?
How does private health insurance generally compare to group benefits (since I’m losing those)?
I’m leaning towards getting whatever they offer since I can get it without proof-of-good-health which most plans for new people seem to require.
A couple things, I’ve actually discussed this scenario with a lawyer who specializes in LTD:
1.Your master policy will determine if severance is an offset against LTD payments. If there is no reference specifically to severance in your master policy then your severance is treated as any other form of passive (aka non worked) income which usually means the LTD insurer gets none if it.
You’ll want to let Service Canada know it is not income you worked for, but severance. That way they won’t halt your CPP-D.
You’re lucky to get severance; in many provinces employers after a few years are able claim frustration of contract and terminate without any severance.
Also, I’ve been comparing private insuranceplans to group policies. Private plans for the same group coverage is incredibly expensive. It’s cheaper for me to just pay for all the dental/medical/prescriptions my family needs and then buy my own term life insurance separately. If you can somehow pay to continue your group benefits after termination, that’s what I would do it for was an options for me (which it isn’t).
!!! Most importantly I totally forgot to add make sure any severance agreement you sign doesn’t release third-parties from any obligations made to you during your employment. You never want to sign a document that releases your LTD insurers from any financial obligation.
If they want you to sign anything to get the severance I strongly suggest you have a lawyer give it a once over before signing any severance package to avoid any nasty surprises.
Well that sucks. Hopefully the severance will cover the increase in medical expenses. I would find out which if any employee benefits are portable and use up as much as possible as quickly as possible (new glasses, wheelchair, fill prescriptions, etc). Also consider ways to minimize the taxes, if you have RRSP room a direct transfer is a good option.
I have interpreted David and other lawyers mentioning, something to the effect of:
The implicit connotation of an employer taking on the risk of an employee going on LTD, by the very nature of making LTD insurance a requirement in many situations, is a known risk and as a result the employer could have trouble terminating employment.
I believe there have been several references to such, on this site.
Hth
Hi Jammer, have you seen our article on this situation? Termination on LTD
You should notify the insurer as in most cases you cannot receive severance and LTD at the same time. The LTD benefit is usually paused for the number of months the severance represents.
It’s always a good idea to notify Service Canada as well so there are no misunderstandings about what the income is.
We also recommend looking at the termination package you receive to ensure your LTD benefit is protected, and you are not signing anything that can affect future benefits.
“You should notify the insurer as in most cases you cannot receive severance and LTD at the same time. The LTD benefit is usually paused for the number of months the severance represents.”
This is the opposite of what two very experienced LTD lawyers have told me. They both said the master policy needs to state severance is an offset against LTD payments. If there is no mention of severance/termination pay then the insurance company is legally not entitled to offset.
Of course, as everything with LTD it is dependent on the policy. Generally, severance is considered employment income and as such you cannot receive both severance and LTD at the same time. In some cases, if you receive 3 months severance, your LTD benefits will be paused for 3 months. This is of course, general advice and not based on your specific situation. If you had a lawyer review the specifics in your situation, then they would know what is appropriate for your case.
If I ask the employer rep. and she says severance is not an offset is that legal?
What if I ask an insurance company rep, would that be legal?
I think I read before about a Rogers front-line rep. offering a cell phone plan that the company didn’t honour because they said the rep was new and didn’t speak for the company.
I’m sure I have the story wrong.
What if the employer wants me to sign a release in exchange for getting severance and I don’t sign, can the insurance company deduct the severance I don’t accept?
I want to verify whether severance is an offset?
Make sure my LTD is protected and I’m not signing any rights away related to LTD.
Does Resolute do this kind of thing and what would be the time frame?
I’m guessing I would have a specific time to sign the form (which I haven’t received yet).
If after consulting with your employer, Ltd insurance, and legal advice it turns out your severance is indeed an offset to your LTD then I wouldn’t accept any severance and definitely not sign anything. Let your employer just finally decide to eventually “frustrate your contract”.
The reason I suggest this is:
To avoid having LTD offset your gross severance and then also having to pay income tax on the gross severance. Your better off just getting $0.00 in severance and paying now tax.
Avoid potentially signing off anything that can jeoprodize yoir future LTD payments.
I spoke to @David_Brannen and I will be following up with the employer and insurance company.
The private health plans are substantially worse than the group plan but I have time.
I don’t know how much more I can say.
Bottom line, I 100% recommend talking to a lawyer in situations like this.
I accepted the first offer.
My point of view was I could have got nothing so I’m lucky.
It’s unfortunate I have to deal with the loss of benefits.
Private health insurance doesn’t seem to make sense.
