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Employment Insurance: Changes effective January 1, 2017

The last federal budget in March 2016 announced changes to Employment Insurance rules (see our News & Views of April 2016), including a reduction in the waiting period for benefits from two weeks to one week effective January 1, 2017. At the same date, the premiums will be reduced.

The decrease in the waiting period will also apply to special EI benefits which include: maternity, parental, compassionate care, parents of critically ill children and sickness benefits. The government has clarified that the total number of weeks of EI benefit entitlement, related to regular or particular special benefits, will not change.

The Budget Implementation Act has been passed and proposed regulations were released by the federal government this fall.

Key implications for plan sponsors:

  • Short term disability (STD) plans – Sponsors of STD plans with two week waiting periods for benefits may wish to reduce the waiting period to one week in light of the change to the EI program. Most plan sponsors with STD waiting periods of one week or less do not need to make any changes.
  • Supplementary unemployment benefit (SUB) plans – Sponsors of SUB type plans (including EI carve-out, maternity leave, leave for care of a child, and compassionate care leave) may see a reduction in plan costs as employees will be able to access EI benefits earlier in their leave period. SUB plan designs may need to be modified to wrap around the reduced waiting period. There is a transitional provision (in place until January 3, 2021) included in the proposed regulations that allows combined EI and employer wage replacement benefits to exceed the typical 95% limit during the second week of a disability.
  • EI premium reduction program (PRP) – The proposed regulations include a transitional provision to provide existing plans participating in the PRP with a four year period to update their plans while continuing to qualify for participation in the PRP. This transitional provision will apply to plans that are in place before the reduction of the waiting period, and expires on January 3, 2021.
  • Long term disability (LTD) plans – Plan sponsors may consider adjusting their LTD elimination period to coordinate with changes to other programs.
  • Salary continuance or other wage replacement arrangements – Plan sponsors with other arrangements should consider the impact of any potential changes on expected costs, disability management best practices, and other factors.

The considerations required in light of the changes to the EI program will vary for each plan sponsor.

EI premium rate change

The Canada Employment Insurance Commission has recently confirmed the 2017 EI premium rates. The employee premium rate will decrease to $1.63 (from $1.88) per $100 of insurance earnings. The maximum employee contribution will decrease to $836.19 from $955.04 in 2016. The employer premium rate is 1.4X the employee rate and the maximum employer contribution will decrease accordingly.

The 2017 rate change is the first under a new ratesetting mechanism that will set the EI premium rate annually at a seven-year break-even level, as forecasted by the EI Chief Actuary. Annual rate adjustments after 2017 will be subject to a limit of 5 cents.

The Quebec Employment Insurance rate effective January 1, 2017 will be $1.27 (from $1.52) per $100 of insurance earnings.

Maximum insurable earnings (MIE) for 2017 will increase to $51,300 from $50,800 in 2016.

News & Views - December 2016 (PDF)