What’s the Difference Between CPP Disability and Long-Term Disability?

CPP and Long-Term Disability

In the landscape of Canadian disability benefits, the Canada Pension Plan Disability Benefit (CPP-D) and Long-Term Disability Insurance (LTD) are designed to provide financial stability to those unable to work due to disability. However, the intricacies and distinctions between these two programs often confuse beneficiaries.

This article seeks to elucidate the fundamental differences between CPP-D and LTD, from their respective eligibility criteria to the nature of the benefits they offer. Our objective is to present this information with the utmost clarity and precision, to assist disabled individuals in understanding how each program can support their unique circumstances, and to guide them through the decision-making process with confidence and ease.

If you’ve been denied long-term disability or your CPP disability benefits – call us today. Our disability lawyers have been helping claimants who have been denied CPP and long-term disability and have recovered millions in compensation since 2003. For a free consultation with an experienced long-term disability lawyer in Hamilton, call Lalande Personal Injury Lawyers at 905–333-8888 or fill out a free Consultation Form today. Alternatively, you can call us toll-free, no matter where in Canada you are located at 1-844-525-2633. Our long-term disability lawyers are happy to schedule a no-obligation consultation with you and your family and advise you of your legal rights and options.

Understanding Long-Term Disability

Long-term disability (LTD) coverage offers a lifeline if you are hindered from working due to an injury or sickness. It replaces part of your income (typically 60-66%) to help maintain financial stability during difficult financial times. To qualify for long-term disability benefits, you must satisfy the definition of total disability as set out in your group or individual policy. 

In most cases, total disability means that you must be substantially disabled from performing the duties of your own occupation. This applies for the first two years. After two years, you must be unable to perform the duties of any occupation for which you may be reasonably qualified by education, training or experience. 

The Elimination Period

The elimination period in long-term disability (LTD) cases is a waiting period between the onset of your disability and when your insurance benefits start to pay out. Think of it like a deductible period, but it’s measured in time instead of money.

During this period, you must be continuously disabled before your LTD benefits kick in. This period can vary from policy to policy but typically ranges from 30 to 180 days. It’s crucial to consider this period when planning for financial coverage if you cannot work due to a disability.

Are Long-Term Disability Payments Taxed? 

If you pay premiums with after-tax dollars and become disabled later on, the benefits you receive are generally tax-free. However, if your employer pays the premiums or they’re paid with pre-tax dollars – unfortunately, your monthly long-term disability benefits will be taxable.

Exploring Canada Pension Plan (CPP) Disability

The Canada Pension Plan Disability Benefit (CPP-D) is a federal assistance program designed to provide partial income replacement to individuals who have contributed to the CPP. They also must meet the CPP disability test as outlined in the Canada Pension Plan legislation, specifically in Section 42(2)(a) of the Canada Pension Plan. The legislative test states that a person shall be considered to be disabled only if they have a severe and prolonged mental or physical disability.

The key components of the test are:

1. Severe: A disability is considered severe if, because of the disability, the person is incapable of regularly pursuing any substantially gainful occupation.

• “Regular” refers to consistent, recurring work that is part of a usual pattern, not occasional or sporadic work.
• “Substantially gainful” means profitable work that provides a significant source of income or livelihood, not volunteer work or hobbies.

1. Prolonged: A disability is prolonged if it is determined in a prescribed manner that the disability is likely to continue for an indefinite duration or is likely to result in death.

• “Indefinite duration” means that the disability is not expected to improve in the foreseeable future and has no specific end date.

To summarize, the CPP Disability test requires that an individual has a disability that is both:

1. Severe enough to prevent them from regularly pursuing any substantially gainful occupation and
2. Prolonged, meaning it is expected to continue indefinitely or is likely to result in death.

This test is designed to ensure that CPP Disability benefits are provided to those who have made contributions to the Canada Pension Plan and can no longer work due to a serious and long-lasting disability. The specific wording of the test is important, as it sets a high standard for eligibility to ensure that the program remains financially sustainable while supporting those most in need.

The applicant also must have made significant contributions, typically in four of the last six years at a minimum. The application process involves submitting a detailed package that includes personal information, a medical report, and consent forms, which can be accessed online or at their physical locations through Service Canada.

The program aims to offer a financial safety net to those who have participated in the workforce and are now facing the challenges of a significant health-related work interruption.

Who Can Apply for CPP Disability?

To apply for CPP Disability benefits, there are some key requirements: You must be under 65 and have contributed enough to the CPP during your working years. Additionally, your disability must be both severe and prolonged—meaning it stops you from doing any gainful work and is long-term or likely terminal.

What is the CPP Child Benefit?

When you receive Canada Pension Plan (CPP) disability benefits, you may also be eligible for a CPP benefit for your child. This benefit is available for each child under 18 or between 18 and 25 if they are still attending school full-time. The child benefit is a monthly payment intended to help parents or guardians receive CPP disability benefits with the costs of raising children. It’s important to note that this benefit is not automatic; you must apply for it and provide the necessary documentation to prove your child’s eligibility.

Applying for CPP Disability Benefits

Applying for Canada Pension Plan (CPP) disability benefits involves several steps. Here’s a point-form guide to the process:

• Determine Eligibility:
  You must have a severe and prolonged disability.
  Ensure you have made sufficient CPP contributions.
• Gather Documentation:
  Collect medical records that document your disability.
  Obtain a detailed medical report from your doctor.
• Complete Application Forms:
  Fill out the CPP disability benefit application form (ISP1151).
  Have your doctor complete the medical report form (ISP2519).
• Review and Assemble:
  Double-check your application for completeness and accuracy.
  Include all necessary identification and supporting documents.
• Submit the Application:
  Mail the completed forms and documents to Service Canada.
  Alternatively, you can submit your application in person at a Service Canada Centre.
• Await Acknowledgment:
  Service Canada will send an acknowledgment that they have received your application.
• Service Canada Assessment:
  Your application will be reviewed to determine eligibility.
  This process can take several months.
• Keep Records and Correspondence:
  Save copies of all forms and documents submitted.
  Keep any correspondence from Service Canada for future reference.
• Follow Up:
  If necessary, follow up with Service Canada if you do not receive a response within the expected time frame.
• Prepare for Possible Rejection:
  If your application is denied, you can request a reconsideration.
  This request must be submitted within 90 days of receiving the decision.

Remember, each case is unique, and the process can vary slightly. If you have specific questions or unique circumstances, it’s important to consult with Service Canada or a professional.

Are my CPP Benefits Taxable?

Yes, Canada Pension Plan (CPP) disability benefits are taxable income. When you receive CPP disability benefits, you must report them on your annual income tax return. The Canada Revenue Agency (CRA) considers these benefits income, and you will be taxed accordingly.

You can request that tax be deducted from your monthly payment to avoid paying a large amount at tax time. It’s also worth noting that if you have little other income, the taxes due on your CPP disability benefits may be pretty low, and you might even be eligible for certain tax credits and deductions that could reduce your taxable income.

Key Differences Between LTD and CPP Disability

The differences between long-term disability (LTD) and Canada Pension Plan (CPP) disability benefits are not always clear-cut. 

LTD is an insurance policy you get from your employer or privately. If you become too ill or injured to work for an extended period, LTD can provide financial support. The amount of aid you obtain depends on the details of your particular policy, but typically, it offers around 60-85% of your pre-tax regular income.

On the other hand, CPP disability benefits are a part of the Canadian government’s pension plan. They’re available if you’ve made enough contributions to the CPP and cannot work regularly due to a severe and prolonged physical or mental disability.

Differences in Eligibility Criteria

To qualify for LTD, a claimant needs to show they suffer from a total disability and is unable to complete the substantial duties of their own employment for the first two years of disability. Then, after the two-year juncture, a claimant has the burden of showing that he or she is completely disabled from any occupation for which he or she is reasonably suited by way of education, training or experience. 

To be eligible for Canada Pension Plan (CPP) Disability benefits, you must have a severe and prolonged disability that prevents you from being able to work at any job regularly. The term “severe” means that you have a mental or physical disability that regularly stops you from doing any substantially gainful work.

“Prolonged” means that the disability is long-term and indefinite or will likely result in death. Additionally, you must have contributed sufficiently to the CPP during your working years. Typically, this means you must have contributed to the CPP in four of the last six years at a certain minimum level or three of the last six years if you have contributed for at least 25 years. It’s important to note that these contributions are based on earnings from employment or self-employment in Canada.

Benefit Amount

The amount of benefits received from LTD and CPP disability can also differ. With LTD, the monthly payout is a pre-determined percentage of your income before becoming disabled.

The amount of monthly Canada Pension Plan (CPP) Disability benefits is calculated based on how much and for how long you have contributed to the CPP, along with your average earnings over your working life. Here’s a simplified breakdown of the calculation:

1. Base Component: Every person who qualifies for CPP Disability receives a fixed flat-rate portion. The government sets this amount, which can change year to year. In 2023, the flat-rate component was $558.74.
2. Earnings-Related Component: On top of the base amount, an earnings-related component is calculated based on your contributions to the CPP during your working life. The more you’ve contributed and the longer you’ve contributed, the higher this portion of the benefit will be.
3. Maximum Amount: The maximum monthly amount that anyone can receive as a CPP Disability benefit is adjusted annually for inflation.

To get the exact amount of your potential CPP Disability benefit, you would typically need to contact Service Canada, as they can provide calculations based on your specific contribution history.

LTD will Deduct your Monthly CPP Benefit

If you’re getting both long-term disability and CPP disability benefits, it’s essential to comprehend how they could influence one another. Usually, LTD policies will state that your LTD must be offset by the amount you receive from CPP. If you get $1,000 a month from LTD and start receiving $600 a month from CPP, your LTD will be reduced to $400.

Should I Apply for Both CPP Disability and Long-Term Disability?

Yes, receiving both benefits would provide more financial security if one claim is terminated. Additionally, once you are approved for CPP disability benefits (or the federal government considers you disabled), many insurance companies will re-evaluate your eligibility for long-term disability.

How Long Do CPP Disability and LTD Last?

Both CPP and LTD are terminated when you reach the age of 65. Certainly worth noting, too, is that being on CPP disability can provide a smoother transition to a CPP retirement pension once you reach 65, and your dependent children might also qualify for benefits.

What Happens if Long-Term Disability or CPP Disability Gets Denied?

If your claim for long-term disability or CPP Disability gets denied, don’t panic. In most cases, you will have the right to file an appeal. With CPP, you can request a re-consideration from Service Canada. With long-term disability appeals, you typically have the right to file an internal appeal or hire a long-term disability lawyer and file suit against the disability carrier to overturn their decision and put you back on a monthly claim. 

Appealing a Long-Term Disability Denial

If your long-term disability benefits are denied or terminated, you can file an internal appeal or hire a disability lawyer and pursue legal action. 

Time plays a crucial role in internal appeals because strict deadlines are involved. You’ll also need more medical proof supporting your inability to work. For instance, reports from specialists can help strengthen your case if they confirm that working isn’t possible due to health issues.

Do internal appeals work? Internal appeals with long-term disability (LTD) carriers often have a reputation for being ineffective because they are reviewed by the same insurance company that initially denied the claim. This can create an inherent conflict of interest, as the insurer may be financially incentivized to uphold their decision to minimize payouts.

Additionally, the same criteria and personnel involved in the original decision are typically used in the internal review process, which may lead to reaffirming the initial denial rather than an impartial reevaluation. Claimants may also lack the expertise to effectively argue their case or provide new and compelling evidence that could change the outcome. As a result, many see internal appeals as a procedural step that must be exhausted before pursuing external legal remedies, where an independent third party can review the case.

In our opinion, it’s advisable to get legal help. Disability lawyers who are experienced in handling these cases know how insurance companies operate and can give guidance on improving chances of success with filing suit against the disability insurance company instead of filing an internal appeal. 

Appealing a CPP Disability Rejection

To appeal a Canada Pension Plan (CPP) disability benefit decision, you must first request a reconsideration from Service Canada. This must be done within 90 days of receiving the decision. You must submit a written request stating why you disagree with the decision and include any new information or medical evidence supporting your case.

If the reconsideration does not result in a favourable outcome, you can then appeal to the Social Security Tribunal of Canada. This appeal must be filed within a specific timeframe after the reconsideration decision. It’s a more formal process where you may present your case to a tribunal member, and legal representation is recommended.

It’s crucial to provide comprehensive and up-to-date medical documentation throughout the appeal process and strictly adhere to all deadlines and procedural requirements.

Have You Been Denied Long-Term Disability Benefits? Contact Our Hamilton Long-Term Disability Lawyers Today for a Free Consultation

If you have been denied long-term disability benefits, it’s crucial to seek the guidance of an experienced long-term disability lawyer to navigate the complexities of your claim and secure the compensation you deserve. At Lalande Personal Injury Lawyers, we understand the profound impact such a denial can have on your life and are committed to advocating for your rights.

Here’s what you can do:

1. Contact Us Immediately: Time is of the essence in disability claims. Reach out to us for a free consultation to discuss your case. You can call us at 905-333-8888 without worrying about upfront fees.
2. Gather Your Documentation: Prepare all relevant documents related to your disability claim, including any denial letters from the insurance company, medical records, and any correspondence you have had regarding your claim.
3. Meet with Our Team: We can meet with you in person at our Downtown Hamilton office, or virtually via Zoom, Google Meet, Microsoft Teams, or Facetime, depending on what’s most convenient for you.
4. No Upfront Legal Fees: We operate on a contingency basis, meaning you only pay if we successfully recover funds for you.
5. Personalized Legal Representation: You get one-on-one attention when you work with us. You will not be passed around; you will work directly with our dedicated team throughout your case.

If you’re ready to start, you can also send us a confidential email through our website and we will be happy to get right back to you. We are here to provide you with the personalized and effective representation that you need during this challenging time.

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