As part of the 2021 federal budget, the government committed to modernizing the Employment Insurance (EI) program in order “to better meet the changing needs of Canadian workers and employers” and “to offer better support to Canadian families”. They have since conducted a series of consultations, carried out in two phases over 12 months (August 2021 through July 2022). Key priorities included making sure the EI program is “resilient, accessible, adequate, and financially sustainable”. The changing nature of work has made it important to ensure that various employment arrangements and workers from all walks of life are considered. Discussions included balancing the needs of employers and employees, the cost implications of enhancing the program, and whether the income replacement percentage and duration of EI benefits meet the objectives of the program and the needs of those contributing to it. You can read details about this process in the Phase 1 and Phase 2 “What we found” reports published online.
In the most recent 2022 federal budget, the government confirmed the extension of the EI sickness benefit period from 15 to 26 weeks. The intent of this extension is to improve the social safety net for those facing illness, particularly those requiring lengthy treatment and recovery time. The income replacement rate (currently 55% of weekly insurable earnings) is not changing. The EI sickness benefit period change is targeted to take effect by the end of 2022.
Impact / Implications and Benefit Plan Considerations
Insurance carriers are still analyzing the impact and implications of this change from a benefit plan perspective. We hope to see commentary and/or guidelines in the near future from the Canadian Life and Health Insurance Association (CLHIA), in follow up to the September 2021 CLHIA Submission on this topic.
In the meantime, speculation and discussion are taking place among carriers and advisors in the Group Insurance industry. The main talking points seem to be consistent and are as follows:
- Employers who offer short-term disability or long-term disability (or both) as part of their employee benefit plan may need to review these benefits, to align them with the new EI sickness benefit period. There will likely be a cost impact, so your insurer will need to be engaged to provide pricing. Baynes & White will provide more information as details become available. We expect there will be a phase-in period giving you time to review, make decisions, and act on those decisions.
- If your organization offers STD (short-term disability) insurance and the benefits are coordinated with EI benefits, you may want your STD benefit period to align with the new 26-week sickness benefit period when the EI change goes into effect.If your organization offers LTD (long-term disability) insurance, you may want to change your LTD elimination period to 26 weeks, especially if plan members claim EI prior to LTD. This will help avoid the payment of disability and EI benefits at the same time, where a plan member may be required to refund EI for benefits overpaid. This change should have the effect of reducing your LTD premiums.
- Employers in unionized environments will need to consider wording of union agreements before making changes.
- Since this change will also have an impact on the Premium Reduction Program (PRP), consultations on changes to this program are underway. The PRP gives employers the advantage of paying lower EI premium rates when they provide their employees with STD plans that meet certain requirements. Nothing will change for now with respect to PRP. If you are currently enrolled in the PRP, you will continue to be eligible when the EI change goes into effect. PRP changes will be announced at some time in the future.
A commonly expressed concern about extending the EI sickness benefit period is the lack of disability management through the EI program. Currently the EI program requires medical information only at the start of a claim. Beyond that, there is no medical management and little or no contact with the employer throughout the period of a claim. This means very little is done to proactively encourage return to work or assist employers with accommodation requirements. The CLHIA submits that “EI must mitigate the possibility of inadvertently prolonging claims, by requiring intermittent medical documentation and providing return to work supports.”
Through STD plans, most insurance carriers provide support to assist both employees and employers through an absence. A case manager is assigned to determine claim eligibility and maintain regular and direct contact, thus ensuring communication, support, and access to resources. Case managers address both medical and non-medical factors that affect workplace absences; and they ensure that potential recovery and return to work opportunities are pursued.
Baynes & White Recommendations to Come
We will continue to monitor as information comes out and provide recommendations / options for our clients according to their various benefit plan arrangements. We will support you through the decision making process and will follow through with administrative support on the amendment process should you decide to make any amendment(s) to your benefit plan.
We will provide further updates as they become available.
Stay tuned for Part 2.