What Happens to my LTD Payments if I Lose my Job in Ontario? 

In most cases, if you lose your job while you’re disabled and receiving LTD payments, you will keep receiving your payments. But there are a few additional things to keep in mind.

In our last post, we talked about when an employer can terminate an employee who’s off on LTD. Here, we continue the theme and look at what happens where an employer goes bankrupt, whether you can still be covered if you become disabled just after losing your  job, and why severance payments may be deducted from your LTD payments.

What happens if my employer goes out of business? 

If you lose your job while on LTD because your employer goes out of business, the same thing generally applies: you will continue to receive your benefits. This is because LTD payments are almost always made by an insurance company and not the employer itself. 

In some circumstances, very large employers fund their own benefits plans and simply hire an insurance company to administer the plan. Those plans are called Administrative Services Only (ASO) plans, and because they are not insured, benefits aren’t guaranteed. Employees who are covered under this type of plan are at a higher risk of losing out should their employer go bankrupt. Many employees are affected in cases like this, and in the past, class action lawsuits have been used to ensure employees continue to receive the LTD or other benefits they were promised.

What if I lost my job just before becoming disabled? 

When you are terminated, your employer is required to continue your benefits for a certain amount of time. By law, the minimum amount of time for this in Ontario is one week for every year of employment, up to eight weeks. Your own plan may prescribe a longer period.

A word about severance

If your employer does let you go and pays you any sort of severance or compensation related to your termination, you need to be aware that it could be considered income and therefore offset (deducted) from your LTD payments.

The interplay between employment severance, insurance payments and other disability benefits (including WSIB and ODSP) can be quite complex. It’s always a good idea to speak to a lawyer to ensure you’re receiving the benefits you’re entitled to.