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How Maximum Insurable Earnings Through EI Will Impact Short-Term Disability

After a two-year review of the Canadian EI program, the Federal Governments’ key findings were that “the increasing number of Canadians who work in non-traditional jobs don’t qualify for EI,” and there are far too many gaps in the program to cover everyone adequately. Throughout all this, they couldn’t process the surge in claims quick enough to distribute EI payments to families who needed them the most.

While changes have been initiated, there is some skepticism among advisors regarding increased premiums and how they will impact plan sponsors in 2023.

Will Employment Insurance (EI) premium rates increase in 2023?

According to the Canada Employment Insurance Commission (CEIC), the EI premium rate for employees will increase to $1.63 (up from $1.58) per $100 of insurable earnings for 2023.

The Maximum Insurable Earnings Ceiling Will Also Increase

The maximum insurable earnings (MIE) determine the maximum rate of weekly benefits paid for all types of benefits under the EI program.

At the start of 2022, the Federal Government increased the MIE ceiling to $60,300 from $56,300 – meaning that Employment Insurance premiums now provided up to 55% of your working income. As a result of the increased MIE, the maximum weekly EI benefit rate increased from $595 to $638 per week.

As we near the end of 2022, the CEIC are now advising that the maximum insurable earnings for 2023 will increase to $61,500 (from $60,300), resulting in an annual cash increase in the maximum EI contribution of $49.71 for employees and $69.59 for employers.

EI will increase from 15 to 26 weeks

However, qualifying for the benefits has also changed. The Canadian Governments’ own survey showed that 62% of respondents said that eligibility requirements should be the same nationally, but that’s not the case.

Here’s a quick rundown:

  • Workers must accumulate 600 insurable hours instead of the 420 they were required before.
  • Those who meet the criteria would be given 55% of their income at a max of $638.
  • The standard changes depending on where you live.
  • Some businesses will require 420 insurable hours; others will need as many as 700.

EI Benefits and Short-Term Disability Plans: What plan sponsors need to know

This policy change will undoubtedly have implications for startups. Here’s a quick breakdown for those that offer and don’t offer Short-Term Disability coverage.

Those offering Short-Term Disability: Plan sponsors who have their Short-Term Disability benefits integrated with EI on their plan will need to realign their benefits with the new 26-week extension carefully. If a plan’s maximum benefits amount is less than the EI weekly maximum of $638, plan sponsors can amend their STD payments to reflect the new weekly maximum amounts.

Those that do not offer Short-Term Disability: If members claim EI before Long-Term coverage, plan sponsors need to realign their plans to the 26-week elimination period to simultaneously avoid double payment of disability and EI benefits. A member might be required to refund EI for overpaid benefits if this happens.

Note: If a plan’s maximum disability benefit is based on the EI maximum weekly benefit or earnings, plan sponsors will not need to amend their contract.

Employers can apply for the EI Premium Reduction Program

With early-stage companies, many have to watch their burn rate and tighten their belts where labour is concerned – especially with talks about a pending recession. Luckily for businesses like this, the government has a solution. They can apply for the Premium Reduction Program (PRP), where they may be entitled to pay their Employment Insurance (EI) premiums at a rate lower than the standard employer rate of 1.4 times the employees’ EI premiums.

Businesses that offer short-term disability benefits can apply for the PRP. In addition, the government’s website can provide more information about everything employers need to know. It is worth noting that the EI premium reduction program will remain as is until 2024. It will not be until then that the program is updated to reflect the changes to EI.

Supplemental unemployment benefits are also an option. These are private-sector solutions to a public and common problem. These can act as a vital tool in the box for startups that are looking to entice their workers. The federal government does allow companies to use such a policy. However, they would have to register these benefits with Service Canada before taking effect. The same goes for short-term disability programs if you want to insure your workers against accidents. Currently, there are 25,000 or so such plans registered with the government.

Check out this blog for more information on the Federal Governments’ EI reform.