Termination pay while on CPP


My name is Alex, I have been disabled since 2009 and I am on CPP. As you know, CPP pension is not enough to survive in Canada! As a result, having a better support system in Europe, I have made plans to move to abroad and live off my pension there.

As such, I am planning to ask for severance and termination pay from my employer.

A few months ago I posted a question on this topic, but was not able to get full clarity on my question on how to approach my employer and ask for severance.

In the meantime, I found out information on how, in Ontario, under ESA, disabled employees can claim frustration of employment, and are eligible for severance pay and termination pay.

Given that I plan to move to Europe, I am really intrigued by the possibility of severing my ties with my employer, and getting 1 week of severance for each year of employment, in addition to 8 weeks of termination pay.

However, as I started to read about the tax implications of termination, I started to worry! In particular, I worry about CPP Canada (ie, Service Canada) interpreting termination pay as employment income.

According to what I read, the employer files severance pay under box 66 (or 67) on my T4, This is good, because employment income is filed under box 14.

However, to my dismay, severance pay, being classified as “pay in lieu”, is filed under box 14, which is employment income!

So my question is: how do I make sure that CPP Canada does not interpret the termination pay entry on my T4 as employment income and cuts me off CPPD?

Remember, I will be in Europe, with very little recourse to rectifying this situation, such a thing were to happen…

Any suggestions?

I think ultimately it should not affect your CPPD since it’s a legacy entitlement rather than pay for current work (and indeed you are only receiving it because you cannot work). However you will probably need to explain it to Service Canada. I had a taxable payment report from my employer in connection with some old stock options. Service Canada sent me a letter asking about the payment reported on my T4 from my employer and said my CPPD would end the following month unless I could explain it. I explained it was for stock options I received before I got sick, sent in the transaction records and that was that.

So I guess make very sure that they have your new address for any correspondence and maybe send them a letter in advance asking how to report it and if it will change any of your CPPD payments.

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Receiving employment income – in and of itself – is not enough to trigger a termination of CPP disability benefits. Rather, the focus is on your capacity to work “regularly in any substantially gainful occupation”. And whether the employment income arouse from actual work you have performed or could have performed.

However, I highly recommend you reach out to Service Canada to explain the situation so there is no confusion when they see you are getting employment income.

David Brannen

Disability Lawyer with Resolute Legal

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