Disability Plans
A Group Short-Term Disability Plan is also called Weekly Indemnity (WI) as it is paid to a claimant on a weekly or bi-weekly basis. Weekly Indemnity becomes payable when an employee becomes sick or injured and unable to work. There is a waiting period before benefit eligibility begins, usually one day for accidents and from three to seven days for illness.
The period of time over which benefits are received ranges from 17 weeks to two years, with most plans falling in the 17 - 26 week range. The most common benefit paid is 66.67% of the weekly wage to a maximum amount determined by plan design, with most plans falling in the $350 - $1400 range. If a Long Term Disability Plan has been included, the Short Term benefit period will be designed to end when the Long Term benefit begins.
Plan Administrators please note the following points:
Employment Insurance (EI) also offers a sickness benefit equal to 55% of an employee’s weekly wage to a maximum of $485/wk (for 2012). This benefit has a two week waiting period before eligibility, and the maximum benefit period is 15 weeks. In keeping with other government income replacement programs, there are longer delays in collecting the benefit, and more ''red tape'' in processing a claim. However, EI does act as a safety net for employees who do not have Short Term Disability benefits.
If the employer has a Short Term Disability Plan in place that is equal to, or exceeds, that offered by EI (most do), the employer is entitled to a reduction of the EI premium. As of January 1, 2010, the employer EI rate is 1.4 times the employee rate. With a qualifying WI plan in place the employer may be entitled to reduce their EI rate, which results in savings on each employee whose earnings are over $45,900 for the year 2012 of $183.96 per month.
A Group Long Term Disability Plan gives employees security. Without a plan in place, a long term disabled employee is only able to claim a disability pension from the Canada Pension Plan (CPP). The maximum pension is $1,187.50 each month (as of January 2012), and only if they had been paying the maximum contribution to CPP each year. Also, the definition of disability that CPP requires before paying that pension is that the disability is permanent, severe and likely to lead to death. Under a group plan, the monthly paid benefit would be higher, and the definition of disability will be more favourable to the disabled claimant. In other words, your medical condition does not have to be as severe, and you will receive a higher monthly benefit.
An example of long term disability would be a 25 year old disabled worker who is entitled to a monthly benefit of $2,000. He or she would, over the course of the disability to age 65, collect $960,000 from this plan.
A common LTD benefit plan is 120 day/age 65/two year own occupation/66.67%/$3000 maximum. This translates to an employee becoming disabled and unable to work waiting 120 days (the elimination period) at which point the employee will become eligible to collect a disability benefit that will continue until age 65, until they die, or are no longer disabled. During the first two years of the disability they must be unable to perform the essential duties of the occupation they were in when the disability started. After two years, in order to continue to qualify for benefits, they must be unable to work at any occupation. The amount of benefit received will be based on 66.67% of their monthly salary, and the maximum benefit they can receive is $2500 per month. LTD plans vary in design in terms of benefit amounts, waiting periods and occupation classification.
Plan Administrators please note:
When the employee pays the premium for the LTD plan, the disability benefit received will be tax free. If the employer pays the premium (even a small portion of it), any disability benefit the employee receives will be fully taxed.
Long Term Disability plans are usually in conjunction with a Short Term Disability (WI plan) or EI sickness benefit. These latter plans are usually around 17 weeks (120 days).
