How To Calculate Long Term Disability Premium

Social Security Disability Benefits

Virtually all LTD policies require you to file for Social Security disability, because LTD carriers can offset your Social Security disability benefits against your monthly LTD payment. The offset works like this: if you receive $1,400 in LTD benefits and are approved for $1,100 from Social Security, you will receive the full $1,100 from Social Security, but only $300 from your insurance company, for a total of $1,400. Similar offsets exist for other types of income, including workers’ compensation, third-party settlements, and retirement benefits.

If the amount of the offset exceeds your LTD check, your LTD carrier will pay nothing, unless your policy contains a minimum monthly benefit. A minimum monthly benefit might entitle you, for example, to the greater of $100 per month or 10% of your gross monthly benefit, even if your offset is more than the LTD amount. If your LTD policy has a minimum, it should be set out in your summary plan description.

Personal Assets / Income

What Can Ontario Employees Do In Light Of The Higher Rates

You need not worry about filing your claim. Most businesses today, because of the higher insurance rates, have contingency plans in place. According to Julie Gaudry, the senior director of group insurance at RBC, With the anticipated rise in LTD claims, businesses should proactively create awareness of the support available to employees and create contingency plans to ensure adequate staffing. While employees must deal with the significant emotional and financial stress of being off work, business owners can be particularly hard-hit as they lose employees during times of strong economic activity.

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Calculating The Cola For Fers

• For Federal Employees Retirement System or FERS Special benefits, if the increase in the CPI is 2 percent or less, the Cost-of-Living Adjustment is equal to the CPI increase.
• If the CPI increase is more than 2 percent but no more than 3 percent, the Cost-of-Living Adjustment is 2 percent.
• If the CPI increase is more than 3 percent, the adjustment is 1 percent less than the CPI increase. The new amount is rounded down to the next whole dollar.
• To get the full COLA, a retiree or survivor annuitant must have been in receipt of payment for a full year.
• If a person has not received the payment for a full year, the increase is prorated under both plans. Prorated accounts receive one-twelfth of the increase for each month they received benefits. Cost-of-Living Adjustments were first prorated in April 1982.
• Adjustments to benefits for children are never prorated.
• Federal Employees Retirement System and FERS Special Cost-of-Living Adjustments are not provided until age 62, except for disability, survivor benefits, and other special provision retirements.
• FERS disability retirees get the adjustment, except when they are receiving a disability annuity based on 60 percent of their high-3 average salary.
• Also, under FERS, if you have a CSRS component, the component is subject to the CSRS COLA calculation.

Eligible For The Hazardous Duty Supplement

If you have at least 20 years of eligible hazardous duty service credit, you may qualify for the hazardous duty supplement as part of your service retirement benefit. You are not eligible to receive a hazardous duty supplement if you retire on disability. If you qualify for the supplement, compare your estimated disability retirement benefit with your service retirement benefit, including the supplement, before applying for disability retirement to determine which type of retirement is best for you. Your human resource office can assist you. You can also create retirement benefit estimates through .

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Tips For Retirement Planning

• Consider talking to a financial advisor about the best ways to make the most of the federal retirement benefits you may be eligible for. If you dont have a financial advisor yet, finding one doesnt have to be complicated. With SmartAssets financial advisor matching tool, you can get personalized recommendations for professional advisors in your local area. You just need to answer a few simple questions to get started.
• One key to successful retirement planning is knowing what your Social Security playments will be. A Social Security calculator can quickly give you a good idea of what your monthly payments will be.

When The Rider Pays Out

Depending on the insurer, you may be able to receive an ROP refund when you hit certain milestones, for a certain percentage of premiums paid during those years. Some insurers set the milestone at seven or eight years and some set it at 10 or 20 years.

Afterwards, the clock starts again, and you should be eligible for another ROP refund at the end of the next milestone period.

Other insurers will only return your premiums at a certain age, usually age 65 or 67, the same age your benefits period would expire if you were claiming benefits up to that age.

If you have the ROP rider, there may be other ways to receive the return of premiums that donât involve reaching a certain age:

• You can simply ask for it, although this would surrender your policy.

• If your policy lapses, some ROP riders will still refund a certain percentage of your premiums paid up to that point.

• If you die, your ROP payment may be made to your estate or any beneficiaries you named.

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Factors That Determine Long

Premiums vary based on the length and type of coverage, your health, the benefit amount, and other factors. In this section, well highlight how these factors may determine costs.

• Age: The earlier you buy disability insurance, the lower your premium rates will be. Thats because as you age, your health declines and you become more likely to suffer a disability or illness. You can, however, lock in the rates for life when you purchase disability insurance when youre healthy.
• Gender: Men pay less than women for disability insurance, because more women file claims for pregnancy and mental health conditions. However, disability insurance rates increase at a faster rate for men than for women, with men paying about 50% higher rates at age 40 and 191% higher rates at age 60 than they would at age 24.1
• Occupation: Hazardous occupations, such as working with heavy equipment, might pay more than someone who sits at a desk all day.
• Health: Your health also affects cost, as people with a history of disabling conditions such as back injuries, arthritis, and asthma could potentially pay higher premiums.

Situations Where You Are Not Considered To Have Collected The Gst/hst

You are not considered to have collected the GST/HST on taxable benefits provided to employees in any of the following situations:

• the property or services that give rise to a taxable benefit are GST/HST-exempt or zero-rated
• a taxable benefit results from an allowance included in the income of the employee under paragraph 6 of the Income Tax Act
• you are restricted from claiming an input tax credit in the situations described in section “ITC restrictions” for the GST/HST paid or payable on the property and services that give rise to the taxable benefit
• the property or services that give rise to a taxable benefit are supplied outside Canada

Example

You, as an employer who is a GST/HST registrant, would like to reward an employee for outstanding performance, and you have agreed to pay for hotel accommodations and three meals a day, for one week, in London, England. An amount will be included in the income of the employee as a taxable benefit. However, you will not be considered to have collected tax in respect of the benefit provided to the employee, since the supplies were made outside of Canada.

Also, if the taxable benefit is for the standby charge or operating expense benefit of an automobile or an aircraft, you are not considered to have collected the GST/HST on this benefit in the following situations:

Note

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Cellular Phone And Internet Services

If you provide your employee with a cell phone that you own, to help carry out their employment duties, the fair market value of the cell phone or device is not a taxable benefit.

However, if you reimburse your employee for the cost of their own cell phone , the FMV of the cell phone or device is considered a taxable benefit to the employee. This is the case even if the employee used, lost, or damaged the cell phone or device while carrying out their employment duties.

If you pay for, or reimburse the cost of an employees cell phone service plan, or Internet service at home to help carry out their employment duties, the portion used for employment purposes is not a taxable benefit.

If part of the use of the cell phone or Internet service is personal, you have to include the value of the personal use in your employee’s income as a taxable benefit. The value of the benefit is based on the FMV of the service, minus any amounts your employee reimburses you. You can only use your cost to calculate the value of the benefit if it reflects the FMV.

For cellular phone service only, we do not consider your employee’s personal use of the cellular phone service to be a taxable benefit if all of the following apply:

• the plan’s cost is reasonable
• the plan is a basic plan with a fixed cost
• your employee’s personal use of the service does not result in charges that are more than the basic plan cost

Note

Loyalty And Other Points Programs

Your employees may collect loyalty points, such as frequent flyer points or air miles, on their personal credit cards when travelling on business trips, even though you reimburse them for the amounts they spend. Usually, these points can be exchanged or cashed in for rewards .

Your employees do not have to include in their income the value of the rewards they received or enjoyed from the points they collect on these business trips, unless any of the following apply:

• the points are converted to cash
• the plan or arrangement between you and the employee seems to be a form of remuneration
• the plan or arrangement is a form of tax avoidance

If any of the conditions above are met, the employee has to declare the fair market value of any personal rewards they received on an income tax and benefit return.

Note

If you control the points you have to report on their T4 slip the FMV of any personal rewards they received from redeeming the points.

For examples of situations where loyalty and other points programs are considered taxable benefits, go to Loyalty and other points programs.

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Reviewing Your Return To Work Schedule

Your manager will review your situation to determine if your needs can be accommodated in his/her organization. They will consult with departmental human resources who will coordinate your return to work with your manager and caseworker, if you are receiving benefits through disability or long term disability.

Your manager will inform the Pay Centre of your return to work or rehabilitation schedule, once it has been approved by the employee, manager and human resources, if it differs from your pre-illness schedule. Your manager will also inform your departmental human resources, who in turn will advise the Pay Centre when you are no longer on a rehabilitation schedule. You will be required to provide the Pay Centre with a copy of the approved rehabilitation schedule from your insurer.

Fers Disability Computation If You Have Reached The Age Of Retirement

If you are age 62 or older when you retire due to a disability, the following FERS calculation applies.

The calculation also applies if you meet the age and service requirement for immediate voluntary retirement and suffer from a disability.

This calculation is known as an earned annuity since you have otherwise met the qualifications for retirement benefits.

The calculation goes one of two ways.

If you are 62 or older when you retire and have less than 20 years of service with the federal government, or are under 62 years old but qualify for immediate voluntary retirement, your annuity calculation will be 1% of your high-3 average salary for each year of service.

Thus, if you serve eighteen years, your annuity is 18% of your high-3 average salary.

Your high-3 average salary is the highest average basic pay you receive for three consecutive years during your employment.

If your salary tops out at $65,000 for three years, thats your high-3 salary.

If your annual salary was $55,000 three years before your disability, then $65,000 per year for only two years before the disability, your high-3 average salary is the average of $55,000, $65,000, and $65,000.

If you are 62 years old or more and have at least 20 years of service to the federal government, your annuity calculation is different.

Your annuity calculation is 1.1% of your high-3 average salary for each year of service.

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What Is Disability Insurance

It can give you a tax-free monthly payment to help replace your income and cover your expenses if an illness or injury keeps you from working.

While a disability can often be visible to the naked eye, not all disabilities are so easily recognized. Chronic pain or a mental health issue can also qualify as a disability.

Disclaimer: Changes In Your Work Or Life Situation

The information on this page applies to departments and agencies served by the Pay Centre. If your department or agency is not served by the Pay Centre, contact your departmental compensation unit.

Please request additional guidance from your manager, departmental human resources and finance, as pay-related information and processes are subject to change.

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Calculate How Much Income You Will Need

The best way to do this is to refer to the budget I discussed in my making informed decisions video. Essentially, you want to determine your main expenses and make sure you can cover those if you were unable to work due to a disability. To be safe, youll want to also consider the amount of savings youll need to continue put away for retirement. Most disability insurance plans stop at age 65, so if you become disabled early and dont recover, your retirement savings may be insufficient. Also, not incorporating retirement savings puts more pressure on future you to make up the difference, including compound returns. Lets say you need $6,000 per month after-tax to cover your expenses and savings.

Premiums Under Provincial Hospitalization Medical Care Insurance And Certain Government Of Canada Plans

You may be paying premiums or contributing to a provincial or territorial hospital or medical care insurance plan for an employee. The amount you pay is considered a taxable benefit for the employee. Report this benefit in box 14, “Employment income,” and in the “Other information,” area under code 40 at the bottom of the employee’s T4 slip. If you have to make payments to such a plan for amounts other than premiums or contributions for the employee, they are not considered a taxable benefit for the employee.

If you are the former employer of an employee who has retired, any amount you pay as a contribution to a provincial or territorial health services insurance plan for the retired employee is a taxable benefit.

Report this benefit under code 118, “Medical premium benefits,” in the “Other information” area at the bottom of the T4A slip.

Any amount that the federal government pays for premiums under a hospital or medical care insurance plan for its employees and their dependants serving outside Canada is a taxable benefit. This also applies to dependants of members of the Royal Canadian Mounted Police and the Canadian Forces serving outside Canada.

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How To Choose A Long

Besides looking for a policy that provides the coverage you need at a price you can afford, you should strongly consider which provider is best for your profession.

Some companies offer more competitive rates and policy options than others for certain professions, so be sure youâre working with a company thatâs more affordable for your chosen field.

How much disability insurance you need and how long you need your benefits to last have a large impact on your policy premiums. Carefully consider your needs and work with an independent insurance agent to find the best policy to protect your long-term financial goals.

How Are Fers Disability Retirement Benefits Calculated

Under the regular federal retirement benefit system, the basic annuity formula is based on age at retirement and years of service. If you retire under age 62 or at age 62 or older with less than 20 years of service, benefits are based on 1% of your high-3 average salary for each year of service. If you retire at age 62 or older with more than 20 years of service then benefits are based on 1.1% of your high-3 average salary for each year of service. However, the amount you can receive in federal disability retirement benefits can depend on your age and the years of service you have when you retire.

Here are some examples of how FERS disability benefits can be calculated.

Scenario #1: Youre age 62 or older at retirement and meet age and service requirements for voluntary retirement.

• If youre 62 or older with less than 20 years of service you receive 1% of your high-3 average salary for each year of service
• If youre 62 or older with 20 or more years of service you receive 1.1% of your high-3 average salary for each year of service

High-3 refers to the average of your salary for the three consecutive years where you earned the most. Typically, these are the final years of service but it can be any three consecutive years in which you had the highest earnings.

Scenario #2: Youre under age 62 at retirement and not eligible for immediate voluntary retirement

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