How it works in practice
Say your LTD benefit is $3,000 a month and CPP-D pays you $1,000. The insurer cuts its payment to $2,000. Your total income may stay roughly the same, but more of it comes from CPP and less from the insurer. You usually don't come out ahead financially. The benefit mostly goes to the insurer.
Why insurers push you to apply
Many policies require you to apply for CPP-D. The insurer may pressure you to apply, estimate an offset before you're approved, or push you to appeal if CPP-D is denied. That's usually legal. A Calgary LTD lawyer quoted by the CBC said there's nothing illegal or immoral about it. Critics argue it shifts costs from private insurers onto a federal program.
The retroactive payment problem
CPP-D approval often comes with a lump sum covering months you've already been paid LTD. The insurer may claim some or all of that retroactive amount as an offset. If you started receiving CPP after collecting LTD for a while, you may have to reimburse the insurer for past overpayments. That lump sum may not be yours to keep, so don't spend it until you've confirmed what the insurer is entitled to.
Things to watch for
- Estimated vs. actual amounts. One firm gives an example of an insurer deducting $1,200 a month for CPP-D when the claimant actually receives $1,000. Insurers can also make errors in how they calculate the offset. Compare their figure against your CPP-D statement.
- Policy wording. Offsets depend on your specific policy. The Supreme Court of Canada case Ruffolo v. Sun Life involved an insurer that offset a claimant's LTD payments by his own CPP benefit and also by the CPP benefits paid for his two dependent children. Whether that kind of deduction is allowed depends on the policy terms.
- Other deductions. Offsets can also apply to things like severance. Once a severance agreement is signed, it can be difficult or impossible to fix offset problems. The same article notes that CPP-D does not interact with severance.
- Overpayment repayment. If you do owe money back, a lawyer may be able to negotiate a payment plan rather than a lump-sum repayment.
When to get help
A lawyer is worth consulting if the insurer is pressuring you to apply, deducting an amount that doesn't match your CPP-D payments, demanding repayment, or cutting off LTD after CPP-D approval. They can read your policy and check the insurer's math. Many LTD lawyers do free initial consultations, but confirm fees upfront.
This article provides general information about the law in Alberta and is not legal advice. Every situation is different. Reading this article does not create a lawyer-client relationship. For advice about your circumstances, contact Andrew Green Law.