Know your Benefit Policy

Like any contract, the policy for an employee group benefit plan is a long and complicated document, complete with clauses aimed to provide an answer for just about any foreseeable question. Generic, yet specific. The benefit booklet, by contract, is a summarized version of this main document. Unfortunately, many employers do not become aware of the many contractual items in a benefit policy until the question or issue arises, which may be too late.

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 contract states, the Long Term Disability benefits terminate at age 65.

·     The policy contract 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, and will not be “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 applying for Canada Pension Plan is not the case, depending upon medical prognosis. 

When the situation does required the application for Canada Pension Plan disability, 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. Note, though while the other additional income is subject to tax, 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 with regards to continuation of coverage for this employee:

·     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.