Frequently
Asked Questions
1 - A union Plan: why it’s better for members
2 - Loss of Income: Alternatives
3 - Why are we having a referendum?
4 - Disability Pensions
5 - Disability Statistics
6 - Why doesn’t the company pay?
7 - Your LTD benefits explained
8 - How the application process works
9 - A graphic look at disability stats
1 - A union Plan:
why it’s better for members
The TCRC LTD Plan is owned by the members of the Plan.
Unlike insurance you could buy from a private company,
the TCRC Plan offers some significant advantages because
it is member-owned.
- If your benefit application is declined,
you can appeal to the Plan’s Board of Trustees.
The Board is made up of elected union officials who
can hear your appeal. With a private insurance plan,
there may not be an appeal process if you are rejected.
- Our
Plan’s administrator, Canadian Benefits
Consulting Group Ltd., helps members to navigate
through bureaucratic problems which may arise in your dealings with the company
which provides the actual insurance. When you are
disabled, the last thing you need is to have to deal
with a big company on your own. With other plans,
that’s
exactly what you would have to do, but with the TCRC
LTD Plan, you get help when you need it.
- With a member-owned plan, any surplus
goes right back into the Plan itself and not into
an insurance company’s profits. This means
the Plan’s
coverage can be expanded as a surplus builds.
- Because
your Plan is member-owned and not-for-profit, it
can use its surpluses to fund benefit improvements.
The TCRC LTD Plan for locomotive engineers has already
been improved to include Accidental Death and Dismemberment
insurance at no extra cost to members. And a special
condition has been added for rail workers, which
allows members to collect LTD benefits for as long
as a year following the elimination period of 41
weeks if they are deemed eligible to return to work
under the Railway Safety Act. When you retire you
are also eligible for 41 weeks of premium rebate.
- A competing Plan states that 55% of all premiums
are paid out in benefits. Our TCRC LTD Plan pays
out 85% of premiums in benefits. The TCRC Plan, because
it is non profit, is simply more cost-effective.
- Because
members own and union Trustees administer the Plan,
premiums are kept as low as possible. If a private
company were to run this Plan, premiums would be
some 10-35% higher, according to insurance companies
which bid for our business.
2 - Loss of Income: Alternatives
If you were to lose your income due to disability and
were not insured, you would probably have to dip into
your savings to survive. But sometimes, doing that
is not as easy as it might seem. Here are some scenarios
for raising money or keeping creditors at bay.
Cashing
in your savings
Many families are simply not able to build up a nest
egg outside of their RRSPs to tide them through tough
times. But for those who do, a number of scenarios
could occur:
- If your money is in locked-in Guaranteed
Investment Certificates (GICs), you could pay a substantial
penalty to cash them before maturity. Cashing them
could also increase your tax bill at just the time
you don’t need it.
- If your money is invested
in the stock market through mutual funds or individual
stocks, you may be forced to sell when the value
of your holdings is lower, or at the very least give
up future growth.
- People often use their GICs as collateral
for a loan. Unless you can pay off the loan (by selling
your car, if it was a car loan, for example), you
will not be able to touch whatever money you are
using for collateral.
Cashing in your RRSP
Some people use their RRSPs as their emergency funds
for bad times. But cashing RRSPs is also fraught
with consequences.
- If you cash an RRSP worth $5,000 or
less, you will have to pay a 10% withholding tax
at the time it is cashed.
- If you cash in an RRSP worth more than $5,000,
there is a 20% withholding tax.
- When you cash an
RRSP, you must pay tax on the entire amount in
the year in which you cashed it. If you were disabled
after working for the majority of the year, cashing
your RRSPs would result in a higher tax rate being
applied to them.
- By cashing an RRSP, you are giving
up years of tax-free growth.
Using your home equity
If you have your home paid off or have built up equity,
you may be tempted to remortgage your house to get
extra funds. However, there are problems with this
approach.
- Unless your spouse has a good job, chances
are you will not be able to get a mortgage. Lenders
want to see evidence of a steady income which is
big enough to support the payments. Even if you had
$100,000 of equity in your home, the bank would look
at your payments as a percentage of your income.
If the percentage is too high, you don’t get
the mortgage.
- Applying for a mortgage when you don’t
have a job could cause all kinds of other financial
complications. The data on your income (or lack of
it) will be entered into a central database, subscribed
to by virtually all lending institutions. Conceivably,
you could find the finance company which holds your
boat loan coming after you because they heard about
your sudden drop in income.
- If you already have an
unused line of credit, using it will result in paying
interest.
Can’t make your mortgage
payment?
Lenders take different approaches to mortgage defaults.
Here are some of the scenarios you might be faced
with:
- If you miss one mortgage payment with a big
bank, you will probably just get a polite letter
asking you to make the payment. Miss a second payment
and alarm bells will start to go off at your branch.
You will likely get a call from the branch manager.
If your bank is understanding, they may agree to
refinance your mortgage at a longer term, which
would reduce the payments. However, this would
depend on you having enough to make the payments
in the first place. Generally, if you miss three
payments with a large bank or financial institution,
you will be considered in serious default. At that
point, it will be out of the hands of your local
branch manager and you will get to meet someone
from the regional office, who will likely start
proceedings to foreclose your mortgage and sell
your house.
- If your mortgage is through a mortgage
broker or a private financier, you will likely
get into trouble earlier. In some cases, mortgage
brokers will start proceedings to foreclose on
a high-risk client after you miss only one payment.
- You
may find relief through a local credit counselling
service, which can negotiate with your lender on
your behalf. There are no guarantees in this process,
of course. And your credit rating will be ruined.
Credit cards
The worst alternative, but one faced by many, is
to take cash advances on your credit cards and
make only the minimum monthly payment on each one.
The disadvantages of raising money this way are
important.
- Most credit cards carry interest rates
of 18% per year or more and the interest is compounded
monthly. After only a couple of months, you’ll
be paying significant interest on the interest.
The longer you carry your balance, the more the
interest charges will mount.
- Interest is charged
from the day you take your cash advance — no
21-day grace period as there is with purchases.
- The relatively low credit limits
on most credit cards ensure you will run out of
credit quickly. Some cards limit your cash advances
to 50% of your credit limit.
Family and friends
If your need is serious enough, you may have to
ask your family and friends for money. Generally
speaking, it’s something we’d all rather
avoid having to do.
Bankruptcy
If things get bad enough, you may have to consider
bankruptcy. You will likely be able to stay in
your home (although you may no longer own it) and
your debts will be wiped out. That’s the
good side. On the bad side, however,
- You won’t be able
to get new credit for seven years. That means
no credit cards at the very least. You might
even have to provide security deposits for your
utilities.
- Bankruptcy leaves a permanent stain
on your credit record. Lending institutions will
be extremely reluctant to extend credit, even
after you emerge from bankruptcy.
- You will not
be able to be bonded and insured by a prospective
future employer, limiting your options should
you be able to return to the workforce at some
point.
3 -
Why are we having a referendum?
Members of the conductors, trainmen and
yardmen group of the Teamsters Canada Rail Conference
on the CPR are being asked to vote on a proposal to
set up a compulsory Long Term Disability Plan. If this
proposal is approved by a majority of the group, premiums
of 1.5% of your gross pay will be deducted from each
cheque. (For example, someone earning $6,000 per month
would pay premiums of $90 per month.)
Here is the sequence of events which led to this point:
- Railway
unions have been trying to negotiate a company paid
LTD Plan since 1984. The company has always refused
during contract negotiations to provide a Plan. The
union membership was never able to come to a consensus
on how important the issue was to them.
- In 1995, the
former Brotherhood of Locomotive Engineers and the
former United Transportation Union set up a plan
to cover all their members at CPR. However, the unions
utilized outside administration who did not adequately
research the costs and the plan ended up with a deficit
of $4.3 million. The insurance company demanded a
365% premium increase to keep the plan operational.
- In
1998, the BLE and UTU hired experienced labour benefits
consultants to investigate the LTD Plan and how it
could be run efficiently. The union Executive Boards
decided at the same time to have a referendum on
whether to continue the Plan.
- In 1999, members of
the BLE voted to keep the plan. Eastern members of
the UTU voted to keep the plan as well, but the western
UTU members decided against it at that time.
- Since
1999, the Plan for the former BLE members has been
administered by the Canadian Benefits Consulting
Group. Premium levels have been stabilized at a level
lower than what the insurance company had demanded.
Prudent management has allowed the Plan to add benefits
and maintain premium costs level.
- The locomotive engineers’ portion
of the LTD deficit from the 1995 Plan was repaid
in 2002 from the LTD Trust Fund.
- When the former BLE
and UTU merged into the Teamsters Canada Rail Conference,
the TCRC Board of Trustees once again raised the
issue of an LTD Plan for the conductors, yardmen
and trainmen group. Given the good post-1999 experience
with the Plan, the Executive believed it was time
that members of the group had the opportunity to
rejoin.
4
- Disability Pensions
Members of the Teamsters Canada Rail Conference at
CP Rail have access to two disability pensions should
they be unable to work again. These are the Canada
Pension Plan Disability Pension and the CPR Disability
Pension.
Disability pensions provide benefits based on the
amount of your contributions. Your LTD benefit is
reduced if you also receive disability pension benefits,
but you are still eligible to receive it. In the
case of the CPR Diability Pension, you must have
10 years’ service with the company.
If it is
determined that you can return to work at some point,
you will not be eligible for a disability pension.
While disability pensions are important, they are
only part of the total disability income picture.
5
- Disability Statistics
General disability statistics:
While these statistics are American, there is no reason
to believe the situation is any different in Canada.
- One
on three working Americans are expected to become
disabled for 90 days or more before age 65.
- The average
period of disability is two and a half years.
- More
than 80% of Americans do not have adequate disability
insurance.
- Your chances of being disabled are as many
as three times greater than your chances of dying.
Occupational statistics:
The following stats are Canadian, and come from the actual experience of the
insurance companies.
- At any given time, we could expect
25-30 people from the conductors, yardmen and
trainmen group to be off work on long term disability.
- Overall,
7-10 people per thousand can be expected to claim
long term disability benefits. The rate increases
to 11 per thousand for workers over age 50, and
25 per thousand in the 60-65 age group.
- Not all
disability claims are work-related. Mental stress
and depression are the biggest causes of long
term disability within our group. Cancer is the
second biggest. Farther down the list are sprains,
fractures, heart problems and motor vehicle accidents.
- 15-20%
of people in our occupational group are expected
to use Short Term Disability benefits at some
point.
- If we lump recipients of both long term
and short term disability together, about 53%
of claims go beyond 21 days in duration.
6 -
Why doesn’t the company pay?
In some workplaces, the company pays
100% of LTD premiums.
Why is that not
happening here?
- Unions have been trying for company-paid
LTD. Companies simply refuses to consider it. Union
members have not considered it to be a strike issue.
- The
best employer-paid benefits are the ones that take
care of instant needs. This means that dental and
drug plans are usually highest on the list of priorities.
- There is an economy-wide trend to cut back on employee
benefits, either by reducing coverage or making employees
responsible for co-payments. An LTD Plan would not
be tax-effective for members if it is based on a
partial-pay scenario. If the premiums were partially
paid by the company, your LTD benefits would be taxed.
If employees pay 100% of the premiums, the benefits
are received tax-free. From a tax point of view,
paying our own LTD premiums is without question the
best alternative.
7
- Your LTD benefits explained
The TCRC LTD Plan is structured to ensure you continue
to receive 50% of your regular gross income in the
event you are totally disabled. Benefit payments
from the TCRC LTD Plan are non-taxable, so depending
on your tax bracket, they could be worth up to 75%
of your after-tax, pre-disability income.
Here is
how the benefits work:
- When you are disabled, you
must first exhaust your Weekly Indemnity Benefit,
Employment Insurance or other Short Term Disability
plans. This happens after 41 weeks of disability.
- Ten
weeks before the 41 weeks are up, you will be sent
a kit which allows you to apply for LTD benefits,
Canada Pension Plan Disability Pension and CPR Disability
Pension. Whether you are accepted or not by the pension
plans, you must apply for the disability pensions
to receive LTD benefits.
- Your application will be
assessed by the insurance company, which will request
your medical records and information from your doctor.
About four in five claims are approved.
- If you get
benefits from the Canada Pension Plan Disability
Pension, your LTD benefits will be reduced by 92.5%
of this amount.
- If you get benefits from the CPR Disability
Pension, your LTD benefits will be reduced by the
amount of those payments.
- Benefits continue until
you are able to return to work, or until you reach
65 years of age.
- If you are not totally disabled but
cannot return to work at your own craft according
to the terms of the Railway Safety Act, the Plan
will still cover you for up to a year.
8
- How the application process works
Applying for LTD and other benefits is stressful,
especially for someone who is coping with a recent
disability. Fortunately, because the TCRC LTD Plan
is member-owned, we can make the process easier.
- The
first way we do this is by automatically sending
you the application forms for LTD and disability
pension benefits. The Plan receives information about
members collecting short term disability benefits
and sends these applications out about 10 weeks before
your short term benefits expire. At least, while
you’re worrying about many other things, you
won’t have to hunt for the proper forms.
- You
will need your medical records for the insurance
company, which will probably want to consult with
your personal physician. The insurance company will
provide a form for your signature which authorizes
your doctor to release these records to them.
- The
TCRC LTD Plan’s administrator will
follow your claim through the approval process. If
there are unforseen snags, the administrator can
sometimes smooth them out without your involvement.
- Once your benefits are approved, the insurance
company will likely monitor your condition and may
require that you participate in vocational rehabilitation.
This happens in roughly one out of seven cases. Again,
the TCRC LTD Plan administrator is there to help
you negotiate through the insurance company’s
bureaucracy, reducing your stress level and ensuring
the best results for you.
It is only because the TCRC LTD Plan is union-owned
that you get this help. Ordinary LTD policies leave
you on your own to deal with the insurance company.
Insurance companies are not charities and they tend
to take a hard look at disability claims. Our Plan
administrator is experienced and knowledgeable in
dealing with them; they get results.
- Unlike commercially-available
LTD policies, you can appeal through the Board of
Trustees if the insurance company rejects your claim.
Because the TCRC LTD Plan is union owned, it is governed
by a Board of Trustees guided by elected union officials
who are members of the bargaining unit. The Trustees
can direct the insurance company to review your claim
if they determine it is valid despite the insurance
company’s judgement.
This is not a guarantee that your claim will be accepted
if the insurance company initially rejects it. But
it is a promise that the insurance company’s
word is not always the final decision.
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