The Canada Pension Plan Disability (CPPD) benefit program is important to group benefit insurance providers for several reasons, as listed below:
- Offsets: When an individual becomes disabled, they may be eligible for disability benefits through multiple sources, such as the CPPD program and their employer’s group benefit plan. In order to avoid overpayment, the group benefit plan may have a provision that reduces the benefit payments by the amount of CPPD benefits the individual is receiving. This is known as an offset and usually comes into play when there is a change of definition.
- Coordination of Benefits: Group benefit plans may have provisions for coordinating benefits with other sources of income, such as the CPPD program. This coordination ensures that the total amount of benefits an individual receives does not exceed a certain threshold, typically a percentage of their pre-disability income.
- Risk Management: Insurance companies that provide group disability insurance benefits use actuarial science to assess the risks of insuring a particular group of people. The availability of the CPPD benefit program and other government disability benefits can have an impact on the risk assessment, as it reduces the amount of the benefits that the insurer may need to pay out.
- Overpayment: The insurance company receives the overpayment of funds for approved CPPD applications retroactively from the date the CPPD application and Medical Report are received by Service Canada.
- Disability Reserves: By having the disabled individual approved for CPPD benefits, the insurance provider can release their disability reserves.
- Future Cost Savings: By having the disabled individual approved for CPPD benefits, the insurance company will realize future cost savings immediately,
- ESG: The insurance company can demonstrate the “S” factor, social responsibility, of the ESG by assisting their disabled claimant to transition into their new stage in life with financial security and dignity.
Overall, the CPPD program is an important part of the disability benefit landscape in Canada, and it is closely monitored by group benefit insurance providers.