Income, Offsets & LTD 

Why have my benefits been clawed back? This is a common question from LTD benefit recipients in Ontario.

Your LTD policy will almost certainly require you to disclose other income you earn while receiving disability benefits, because they are allowed to deduct those amounts from their payments to you. The insurer wants to pay as little as possible, so they’ll look for every avenue to reduce their payments. This is called offsetting of benefits (also known as coordination of benefits, or integration of benefits).

You’ll almost never be earning as much income while on LTD as you would if you were working. Because of this, many clients want to know if they can “stack” different sources of income so that they are earning as much as possible. Unfortunately, the reality is that most other income/benefits will be deducted from the LTD benefit payment.

What income can be offset?

There are many different types of income that may be offset. What qualifies? Your policy will likely set out a list of other types of income or benefits and in what order they are offset. Here are some common types of other income:

  • CPP or CPP Disability, and related benefits such as Children’s Benefits
  • WSIB (monthly benefits or lump sums)
  • Public Service Superannuation Act (PSSA) payments
  • Auto insurance income replacement payments
  • Vacation or severance pay

If the policy does not specifically mention a particular type of income, you may be able to make the case that it should not be offset.

If you are eligible for other disability benefits and your LTD insurer asks you to apply for them, it is your responsibility to do so. Most often, your LTD insurer will require you to apply for CPP Disability.

What does and does not qualify as income can be very complex. The caselaw in this area is always changing, and insurers have been known to update their policy wording accordingly to protect their financial interests.

If you are having a dispute with your insurer on this issue, we encourage you to get in touch with us–we would be pleased to help you.