2014 Employment Insurance Premium Rate
Summary of the Actuarial Report on the Employment Insurance Premium Rate
Pursuant to section 66.31 of the Employment Insurance Act, the Canada Employment Insurance Commission (the Commission) is pleased to present the following summary of the results of the Actuary’s Report prepared by the Commission’s Chief Actuary, Employment Insurance (EI) Premium Rate Setting, in respect of the 2014 EI premium rate.
In 2011, Shelly Glover, then Parliamentary Secretary to the Minister of Finance, and Kellie Leitch, then Parliamentary Secretary to the Minister of Human Resources and Skills Development (HRSD), undertook cross-country consultations with Canadians on how the EI rate-setting mechanism could be further improved. The consultations indicated that Canadians want stable and predictable EI premium rates, and a transparent rate setting process.
In response to the consultations, the Government introduced a number of changes to the EI rate setting mechanism through its Economic Action Plan (EAP) 2012 to enhance the predictability and stability of EI premium rates. These changes included:
- Limiting the amount by which the premium rate can change from year-to-year to five cents per $100 of insurable earnings;
- Implementing a new rate setting mechanism once the EI Operating Account has returned to cumulative balance. The EI premium rate will be set annually at a seven year break even rate to ensure that the Account is balanced at the end of that period. Annual adjustments to the rate will continue to be limited to five cents, with the exception of the first year in which the seven year break even rate is set, when there will be no limit on how much the rate can decline; and,
- Advancing the date by which the premium rate must be set to September 14th, rather than November 14th, in order to provide more notice to employers and workers of the rate for the coming year.
In addition to these changes, the Government suspended the Canada Employment Insurance Financing Board (CEIFB) Act and dissolved the CEIFB – the Crown Corporation responsible for setting EI premium rates – as of March 7, 2013. At the time that the legislation was introduced to suspend the CEIFB Act, the Government stated that the CEIFB Act would be suspended until the EI Operating Account has returned to cumulative balance and the CEIFB can fulfill its full legislative mandate.
During the period of the suspension of the CEIFB Act, premium rates will be set by the Governor in Council according to the premium rate setting mechanism currently set out in the EI Act, with the Commission taking over responsibility for reporting.
More specifically, EI premium rates will continue to be set to ensure that EI revenues and expenditures break even over time, subject to the five-cent limit on annual changes to the rate, thus ensuring affordability for premium payers while offering on-going stability and predictability.
To ensure continued transparency and accountability in the rate setting process, the EI Chief Actuary is required to submit to the Commission an actuarial report on the EI premium rate for the year. The Commission is required to prepare a summary of this report and present this summary report and the EI Chief Actuary’s report to the Ministers of HRSD and Finance. The EI Act requires the Minister of HRSD to table in Parliament the Actuary’s report and the Commission’s summary report within 10 sitting days of the EI premium rate being set.
The legislative provisions of the Department of Human Resources and Skills Development Act require the Commission to engage the services of a Fellow of the Canadian Institute of Actuaries who is an employee of the Office of the Superintendent of Financial Institutions (OSFI) to perform the actuarial forecasts and estimates for the purposes of EI premium rate setting.
On March 14, 2013, Mr. Michel Millette was appointed as the Commission’s Chief Actuary, EI Premium Rate Setting. Mr. Millette, who is a fellow of the Canadian Institute of Actuaries and of the Society of Actuaries, is a managing director at OSFI with over 30 years of actuarial experience. He has also worked as the Chief Actuary of the CEIFB, and as such, has recent experience working on the EI program and premium rate setting.
The Commission is also responsible for the annual Maximum Insurable Earnings (MIE), as well as the premium reductions related to the Quebec Parental Insurance Plan (QPIP) and employer wage-loss plans under the Premium Reduction Program (PRP).
The Canada Employment Insurance Commission
The Commission is a departmental corporation of the Department of HRSD and plays a key role in administering the EI program, including through the making of regulations, with the approval of the Governor-in-Council, and reviewing—as well as approving—policies related to EI program administration and delivery. In addition to its new role in EI premium rate setting, the Commission produces the annual EI Monitoring and Assessment Report in order to monitor and assess the impact and effectiveness of the benefits and other assistance provided for in the Employment Insurance Act for individuals, communities and the economy.
The Commission has four members, representing the interests of workers, employers, and government. The Commissioner for Workers and the Commissioner for Employers are appointed by the Governor in Council for terms of up to five years. They are mandated to represent and reflect the views of their respective constituencies. The Chairperson and Vice-Chairperson are, respectively, the Deputy Minister and Senior Associate Deputy Minister of the Department of HRSD.
Summary of Actuary’s Report
Pursuant to section 66.31 of the Employment Insurance Act, this summary presents the results of EI Chief Actuary’s report in respect of the 2014 EI premium rate. In accordance with the legislation, the actuarial forecasts and estimates included are for the purposes of the calculation of the EI premium rate, the annual MIE, as well as the premium reductions related to the QPIP and employer wage-loss plans under the PRP.
Premium Rate for 2014:
- Section 66 of the Employment Insurance Act requires a premium rate to be set annually to ensure that EI cumulative revenues and expenditures break even after December 31, 2008, until the end of the year in question, subject to a five cent limit on year-to-year changes.
- In accordance with section 66 of the Employment Insurance Act, the maximum premium rate for 2014 that could be set is $1.93 per $100 of insurable earnings, representing a five-cent increase over the 2013 premium rate of $1.88.
- It should be noted that, without the limit on year-to-year changes in place, the break even EI premium rate for 2014 would be $2.08, 15 cents higher than the rate of $1.93.
QPIP Premium Reduction:
- The Employment Insurance Act and Regulations provide for premium reductions for residents of a province that administers its own insurance plan for the payment of special benefits, whereby those provincial benefits replace federal EI benefits. As a result, EI premium rates are lower for residents of Quebec, because the province of Quebec administers its own parental insurance plan, known as the QPIP. The 2014 QPIP reduction is 35 cents, meaning the maximum premium rate that could be set for residents of Quebec in 2014 is $1.58 per $100 of insurable earnings.
Maximum Insurable Earnings:
- Section 4 of the Employment Insurance Act provides for the annual calculation of the MIE, which is the maximum annual amount of employment income on which EI premiums are paid by workers and their employers and for which benefits may be paid. The MIE for 2014 is $48,600, up from $47,400 in 2013.
- The MIE is indexed to the annual percentage increase in the average weekly earnings of the industrial aggregate in Canada, as published by Statistics Canada, to ensure that the level of income insured maintains its relative value.
- As a result of the MIE and premium rates for the year, the maximum amounts of premiums paid by workers and employers (per employee) for 2014 are shown in the table below.
|Premium Rate (per $100 of insurable earnings)||Maximum Employee Premium||Difference in Maximum Employee Premium from 2013|
|Employers||$1.93 x 1.4 = $2.702||$1,313.17||+$65.60|
|Workers in Quebec||$1.58||$767.88||+$47.40|
|Quebec Employers||$1.58 x 1.4 = $2.212||$1,075.03||+$66.36|
- Self-employed individuals that have opted into the EI program in order to access EI special benefits pay the same premium rate as salaried employees and pay premiums up to the MIE.
- Eligibility for benefits is a key feature of the EI program and ensures that those who receive benefits have a minimum level of attachment to the workforce. Pursuant to section 152.07 of the Employment Insurance Act, a self-employed person who opted into the EI program may qualify for EI special benefits providing they meet prescribed requirements, which includes a minimum amount of self-employed earnings. For 2014, the prescribed amount of self-employed earnings is $6,515.
- The level of earnings required by self-employed persons to be eligible for special benefits is indexed annually to the growth in the MIE to ensure that the level of self-employed earnings required to be eligible for special benefits maintains its relative value over time.
Premium Reduction Program:
- The Employment Insurance Act and Regulations also provide for premium reductions for employers who provide their employees with a short-term disability plan that meets certain requirements. This is administered through the PRP. It is estimated that the 2014 reductions will provide registered employers and their employees with $852 million in premium relief. The premium reductions are shown in the table below. Employers registered in the PRP will be notified individually, as individual premium reductions may vary.
- There are approximately 32,500 employers registered in the PRP, covering $266 billion in insurable earnings.
|Category 1||Category 2||Category 3||Category 4|
|Premium Reduction |
(per $100 of insurable earnings)
EI Operating Account Projections:
- Based on the premium rates described above, the EI Operating Account is projected to record an annual surplus of $3.85 billion for 2014. As a result, the cumulative deficit in the Account is forecast to be $1.97 billion as of December 31, 2014. Forecast EI revenues and expenditures for 2014 are shown in the table below.
|EI Premium Revenues (millions)||EI Benefit Expenditures (millions)||EI Operating Account Annual Surplus (Deficit)(millions)||EI Operating Account Opening Cumulative Surplus (Deficit) as of December 31, 2013 (millions)||EI Operating Account Closing Cumulative Surplus (Deficit) as of December 31, 2014 (millions)|
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