In the Policy
Like any contract, the policy for an employee group benefit plan is a long and complicated documents complete with clauses aimed to provide an answer for just about any foreseeable question. The benefit booklet, by contract, is a summarized version of this. Many contractual items in a benefit policy never become apparent until the question or issue arises.
The following are three contractual items brought to light during an annual administrator’s check list review.
Situation: Life Insurance Continuance while on Long Term Disability Claim
An employee on Long Term Disability claim, approved for life waivers, turns 65. What happens to the Life Insurance?
- The Long Term Disability benefit terminates at age 65.
- The policy outlines that the Life Insurance will reduce by 50% at age 65 and terminate at 71.
For this employee, the life insurance terminates with the long term disability, at age 65, when the waiver ends because the employee was not “actively at work” as stipulated in the policy wording.
Situation: Long Term Disability Direct Offsets and Canada Pension Plan
When an employee makes a Long Term Disability claim which is considered severe and prolonged, they will typically be advised by the insured underwriter to apply for Canada Pension Plan Disability benefits as well.
This is not every case.
Eligibility for Canada Pension Plan government sponsored disability benefits are usually within circumstances where a medical condition is severe and prolonged, and there are sometime claims where this is not the case depending upon medical prognosis.
When this is the case though, the policy will typically confirm that if an employee is eligible for any other income amounts, that income will REDUCE their Long Term Disability benefit payment and the eligible additional income is subject to tax, while their Long Term Disability benefit income (if the premiums were employee paid) will remain non taxable.
Situation: Maternity/Paternity leave benefit choices
When an employee has the happy occasion of expecting a child and will be on leave from work for a set period of time, there are typically three choices for the employer:
- Retain full benefits.
- Decline full benefits.
- Retain only the health and dental portion of the benefit plan.
However, not every employer will offer these choices for various reasons, including, but not limited to the applicable legislation in a given provincial jurisdiction. The choices offered to employees in these circumstances is the responsibility of the Employer to communicate and advise.
As with most items of this nature, it is recommended the employer complete a corporate policies and procedures manual as a reference for them and their employees. This should adhere to applicable legal and accounting rules, as well as government legislation.
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