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Are CPP post-retirement disability benefits a deductible payment for loss of income?


The Canada Pension Plan (CPP) disability benefit is a monthly payment you can receive if you:

  • are under 65 years of age
  • have a severe and prolonged mental or physical disability that regularly stops you from doing any substantially gainful work and
  • have either been an active contributor to the CPP for at least four of the six years prior to your application, or you have contributed for at least 25 years, including three of the previous six years of your application

CPP disability benefits received as a result of the accident are deductible in the calculation of a weekly Income Replacement Benefit (IRB), according to paragraphs 3(7)(d) and 7(1)(“A”) of the Statutory Accident Benefits Schedule (SABS)—Effective September 1, 2010, Ontario Regulation 34/10.

When a claimant turns 65, their CPP disability benefit automatically converts to a CPP retirement pension and, as such, it is no longer deductible in the calculation of their IRB.

A CPP post-retirement disability benefit is a new benefit that became available on January 1, 2019. It is meant for CPP retirement pension beneficiaries found to be disabled but not eligible for a disability pension due to being CPP retirement pension beneficiaries for more than 15 months. It is available if you are between the ages of 60 and 65, satisfy the conditions identified above, and are already receiving the CPP retirement pension for more than 15 months, or become disabled after starting to receive your early retirement pension. Paid in addition to the CPP retirement pension, it is determined as the flat-rate component of the CPP disability pension, which is $505.79 in 2020, and is payable only until 65.

However, the introduction of this relatively new benefit gives rise to the question, are CPP post-retirement disability benefits received because of the accident deductible in the calculation of an IRB the same way CPP disability benefits are for a claimant receiving same and under the age of 65?

Let's examine the facts. There is no separate application for a CPP post-retirement disability benefit. It is made using the same form as is used to apply for a CPP disability benefit. Service Canada refers to two types of CPP disability benefits, which would also appear to indicate that they are the same, but for the conditions of the claimant's age and whether they are already receiving early CPP retirement benefits. In essence, CPP post-retirement disability benefits are CPP disability benefits one would have received up to 65, except they elected for early receipt of CPP retirement benefits.

If you are receiving a CPP disability benefit because of the accident and have children under 18 or between the ages of 18 and 25 in full-time attendance at a recognized university or school, the CPP children's benefit (which may also be payable) is not deductible in the calculation of an IRB, as per the findings of the Arbitrator at the Financial Services Commission of Ontario in the matter of State Farm Mutual Automobile Insurance Company and Pamela Blakely (FSCO A09-003232) (“Blakely decision”).

Ms. Blakely's motor vehicle accident occurred on August 18, 2005. At the time, the ‘payment for loss of income' definition was contained in subsection 2(9) of the SABS and included payments of disability pension benefits under the CPP. The present-day definition of a ‘payment for loss of income' is contained in paragraph 3(7)(d) of the SABS and includes the identical CPP disability benefits wording.

The Arbitrator concluded that Ms. Blakely's CPP disability benefit met the SABS definition of a 'payment for loss of income'. In contrast, her CPP child's benefit, which is considered the child's income, did not. The Arbitrator also noted that if it had been the intention for CPP child's benefits to be included in the SABS definition of a ‘payment for loss of income', it would have said so, and that what the definition does say is that it includes payments of disability pension, which a child's benefit is not.

Of course, paragraph 3(7)(d) of the SABS is not specific in its wording as far as CPP post-retirement disability benefits are concerned. Still, it would appear that they do constitute payments of disability pension under the CPP. Particularly as a separate application must be made for a CPP child's benefit, and this is not the case for a CPP post-retirement disability benefit and the CPP post-retirement disability benefit is determined in the same manner as the flat-rate component of a CPP disability benefit. As such, it would appear that CPP post-retirement disability benefits received as a result of a motor vehicle accident are deductible in calculating the related IRB. However, you may wish to seek a legal opinion in this regard.

As we start the New Year, CPP disability benefits were indexed by 1%, effective January 1, 2021, so now is the time to revisit and update last year's IRB calculations for your claimants who are now receiving greater CPP disability benefits.

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