Disabled employees can represent a significant continuing liability under group insurance plans.

 

Employers are often under pressure to discontinue benefits, but find it difficult to deal with the specific circumstances involved in each case. There is a lack of formally defined regulations for the continuation of benefits for employees absent from work due to illness or injury. This makes it extremely difficult to establish one set of guidelines for all employers.

We recommend that a formal policy be established with respect to the continuation of benefits for disabled employees. The following are some guidelines for your consideration:

• It is important that sick pay or disability benefits are continued and the employee’s eligibility for long-term disability (LTD) benefits is not impaired.

• The Workers’ Safety Insurance Board (WSIB) states that an employer must continue payment of
benefits for one year for employees receiving payment from WSIB.

• Human Rights does not specify the period for which benefits must be continued. However, they may consider it discriminatory if benefits were continued for employees receiving benefits from WSIB but not continued for employees receiving LTD.

• Human Rights does not permit discrimination between an active employee and a disabled employee. Any benefit available to an employee prior to disability must be continued in the event of a legitimate disability.

• Insurance policies do not typically state any position with respect to the continuation of benefits for employees on long-term disability.

• If an employee is disabled and receiving WSIB benefits, an application for LTD should also be submitted to the group insurance carrier in order to establish eligibility for the LTD benefit. This is   important in the event that WSIB benefits terminate in the future.

• Many life and accident insurance policies contain a provision for waiver of premium due to disability.This provides for continuation of life insurance coverage without premium payment until the earliest of recovery, death or the employee reaching age 65. Under a group insurance policy, LTD premiums are waived upon the commencement of benefits.

These guidelines ensure that all employees insured under the group benefit program have equal access to continued life insurance and long-term disability coverage in the event of disability.

The difficulty for employers lies in determining when, and if, health and dental benefits for a disabled employee can be terminated. The decision to discontinue a disabled employee’s health and dental benefits is dependent on when the employee/employer relationship can be terminated. If the individual’s status as an employee is terminated, the individual is no longer eligible for health and dental coverage under the terms of the group insurance contract.

An employer may terminate an employee whose contract of employment has become impossible to perform or been “frustrated” because of illness or injury; for just cause; or after giving reasonable notice of termination based on the Employment Standards legislation in the applicable province. Benefits must be continued during the statutory notice period in all provinces.

Prior to termination of a disabled employee, legal counsel should be obtained. Employers may be vulnerable to court action unless undue hardship can be proven (particularly for employers with more than 20 employees) or the employer has made every effort to accommodate the return of the disabled employee to the workforce. This decision is dependent upon the nature and expected duration of disability, the length of service of the individual employee and type of occupation, size of the company and duty to accommodate employment requirements and limitations of the disabled employee.

Benefits should be continued for a minimum of one year from the date of disability. It is however, typical for employers to pay benefits for a period of two years. The main reason for this two-year extension is that it coincides with the two-year own occupation definition in the most LTD contracts. Employees who qualify for continued LTD after the first two years of disability usually have a chronic condition and will not return to work. It is generally considered that two years of disability is sufficient time for employers to terminate the contract of employment on the basis that it is “frustrated”. Once employment is terminated, benefits can no longer be provided through the benefit plan.

 

We recommend that you insert a page into your Company Policy that states, “Our Company will continue health and dental benefits for our employees receiving disability benefits, for a period of x years. The employee will continue to be responsible for their portion of the premium. In the event that the employee does not pay their portion their coverage will be lapsed by the insurance company for non-payment of premium”.

 

ProvinceWorker’s Safety Insurance BoardLabour StandardsHuman Rights (Provincial)
 OntarioEmployer must continue payment of benefits for 1 year while employee is receiving WSIB benefits or participating in an approvedrehabilitation program. Employee is responsible to continue paying his/her portion of the costEmployer may terminate a disabled employee if the contract of employment has been frustratedIt would be considered discriminatory if benefits are continued for employees receivingWSIB benefits but not continued for employee receiving long-term disability benefits.

The Leslie Group is a full service benefits consultingfirm that is, in keeping with market conditions and legislative changes, committed to providing you with the best advice needed to manage your group benefits program. We would be pleased to address any questions and can be reached at (416) 510-8966.