Changes to the disability pension under the Québec Pension Plan and the potential impact on your group insurance

Changes to the disability pension under the Québec Pension Plan and the potential impact on your group insurance

Retirement and Benefits

Issue 23-16
Wed, 06/28/2023 - 13:09

On February 24, 2022, the Government of Quebec adopted Bill 17 modifying the provisions of the disability pension paid by the Quebec Pension Plan (QPP). With this bill, the government aimed to: 

  • Increase the retirement pension of disabled persons;
  • Provide more flexible eligibility rules for disability benefits;
  • Offer greater flexibility to disabled workers.

The entry into force of the amendments contained in the Bill will be implemented in two phases. A portion of the changes came into effect on January 1, 2022, and a full implementation of the measures is scheduled for January 1, 2024. While all these changes potentially have an impact on long-term costs of disability coverage offered in group insurance plans, the modification to the calculation of the disability pension could, in certain cases, have a more significant impact. This change will come into effect on January 1, 2024.

Current QPP disability pension

Currently, the disability pension consists of two components: a fixed portion and a variable portion. The fixed portion corresponds to a flat monthly pension amount for all those who qualify as a disabled person determined by the QPP legislation. This fixed amount is $558.71 per month for 2023 and is indexed annually. The variable portion is, for its part, based on the employment income reported in the name of the contributor to the Québec Pension Plan. This portion corresponds to approximately 75% of the retirement pension credited to the participant. It is important to note that even though there are two calculation components which determine the benefit, at the moment there is only one pension payable, the disability pension.

New formula

As of January 1, 2024, a disabled participant between ages 60 and 65 will receive the sum of two pensions, namely a fixed disability pension and a retirement pension.

The new fixed disability pension amount corresponds to the same flat amount as the current disability pension ($558.71 per month for 2023). This amount will continue to be indexed annually.

For the retirement pension portion, the amount corresponds to the QPP retirement pension to which a participant is entitled as of age 60. However, the disabled participant can opt to request payment of his retirement pension portion between the ages of 60 and 65 or delay the payment until they reach age 65. A disabled participant who requests payment of their retirement pension prior to age 65 will receive a lower reduction than that of a participant without a disability. This new formula ensures that a disabled participant who applies for a retirement pension between ages 60 and 65 will receive from the QPP, a total amount equal to or greater than what is currently provided for by the plan for a disabled person.

In addition, the retirement pension that will be paid to them as a retiree after age 65 will also be equal to or greater than what is currently being received under the old formula. This new formula therefore represents an improvement to the QPP for disabled persons.

As initially proposed in the government objectives, the new formula provides more flexibility and, in many cases, higher amounts for disabled persons between ages 60 and 65.

It should be noted that persons affected by these changes do not have to take any action with Retraite Québec. All cases will be re-examined, and the required adjustments will be applied, when necessary.

Impact on group insurance

Depending on the contract wording, it is possible, following the enactment of the new legislation relating  to the calculation changes of disability pensions that it causes an obligation within the group insurance contract to pay a higher disability pension than currently being paid to disabled participants between ages 60 and 65. Since the integration/coordination clauses of disability insurance coverage in group insurance contracts can be variable, the impact of the QPP change effective January 1, 2024, can also be variable and depend on the contractual clauses.

Since the calculation of the Québec Pension Plan disability pension reform will imminently become effective, January 1, 2024, we invite you to review your contract clauses to establish if these changes will have an impact. An analysis could also be conducted in order to fully understand the possible financial implications on your disability insurance plan and to identify any available options. This analysis could, if required, make it possible for necessary contract changes to be effective prior to the QPP changes on January 1, 2024.

If needed, our group insurance consultants are available to assist you in your analysis.

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