As promised in the 2021 budget, the federal government has modernized Employment Insurance (EI) to better reflect the current context. Recently, the government announced two significant changes.
The first is the increase of the EI insurable earnings from $60,300 to $61,500 annually thereby increasing the weekly maximum EI benefit to $650, effective January 2023. The second is a change to the sickness benefit period. The federal government has made a permanent extension of the benefit period from 15 to 26 weeks, effective December 2022.
How are employee benefits affected?
The increase to the weekly maximum benefit may be reflected in adjustments to Short Term Disability plans.
- STD/WI plans with a set maximum based on the EI maximum—not a specific dollar maximum—will reflect the increase automatically, starting January 1, 2023. Premiums will reflect the increase in the STD benefit amount payable. No contract amendment is necessary.
- If the plan is registered for the Employment Insurance Premium Reduction Program (PRP) and the plan’s maximum benefit is less than $650, plan sponsors may wish to consider increasing the STD maximum to $650, to remain eligible for the EI PRP.
The increase in the benefit period, however, can have a significant effect on both STD and Long-Term Disability (LTD) benefits. Employers may wish to consider the following:
|120 day elimination period for LTD plan (No STD plan)
|Change elimination period to 189 days (26 weeks) to match EI
|Rate reduction to LTD by extending elimination period to match EI.
Reduced claim management time (possibly extending employee absence)
Maintain 120 day elimination period as higher income earners will be better off with the shorter EP
Communicate changes to employees
|17 week STD benefit period
19 week LTD elimination period (120 day)
|Increase STD benefit to 26 weeks
Increase LTD EP to 26 weeks
|Increase STD rate
Decreased LTD rate
|Carve out plan where STD pays for first 2 weeks, EI pays for next 15 weeks, then LTD begins at 17 weeks
|Increase LTD EP to 26 weeks
|Eliminate overlap between EI and LTD
Potential rate reduction
Disadvantage to higher income earners
ASSOCIUM Benefits invites plan sponsors to review their disability plans in light of these changes. For most, there are potential rate savings regardless of which insurance company is underwriting your plan.
As noted, however, employees earning higher incomes will be disadvantaged by the extension of the LTD Elimination Period as their benefit would be greater than EI.
Our insurance partners such as the Co-operators, Equitable Life, Unistar, and others, will not be making any unilateral changes to their disability benefit plans.
If you wish to explore amending your benefits plan to match the 26 week EI benefit, please contact your ASSOCIUM representative.