Register a supplementary unemployment benefit plan - Overview
1. Overview
A supplementary unemployment benefit plan (SUBP) is a plan that is established by a single employer or group of employers to top up employee employment insurance (EI) benefits during a period of unemployment due to training, sickness, accident, disability, maternity, parental, compassionate care, family caregiver leave, or a temporary stoppage of work.
An employer can choose from the following options when registering a SUBP:
- no plan to register
- register with Service Canada
- register with the Canada Revenue Agency (CRA)
- register with both Service Canada and the CRA
No plan to register
An employer may choose not to set up and register a SUBP if the employer intends to offer benefits only for:
- maternity leave
- parental leave
- compassionate care leave
- family caregiver leave
In this case, the benefits above can be paid to employees directly out of an employer’s general revenues. Service Canada would not reduce an employee’s EI benefit if the employee receives these benefits from his or her employer, provided certain requirements are met.
Register with Service Canada
An employer can set up a SUBP and fund it out of general revenues and register the plan only with Service Canada. Benefit payments from a plan registered with Service Canada are subject to Canada Pension Plan/Quebec Pension Plan deductions as well as income tax. An employer might choose to register in this way if the purpose of the plan is to pay benefits for:
- temporary stoppage of work
- training
- illness
- injury or quarantine
- a combination of these reasons
Register with the CRA
An employer who wants to register a SUBP with the CRA must pay the contributions to a trustee. This allows the employer to claim a deduction for the contributions. The contributions made to the SUBP, and the investment earnings within the plan, are not taxable to the employee while the money remains in the trust. Once payments are made from the SUBP to the employee, they are included in the employee’s income in the year received. The benefit payments that an employee receives from a plan registered with the CRA are not subject to Canada Pension Plan/Quebec Pension Plan contributions or EI premiums. If a plan is not registered under the Income Tax Act, any contributions made to the plan by the employer would not be considered to have been made to a SUBP under section 145 of the Income Tax Act.
An employer might choose this type of plan to pay benefits for:
- maternity leave
- parental leave
- compassionate care leave
- family caregiver leave
Register with both Service Canada and the CRA
When an employer wants to register a SUBP with both government departments, the plan should first be registered with Service Canada and then with the CRA. Most often, this SUBP will provide benefits for:
- temporary stoppage of work
- training
- sickness
- accident or disability
As noted above, when a SUBP is registered with the CRA, the contributions that the employer makes to the trustee are eligible for deductions. All earnings on the contributions are tax deferred until benefits are paid out of the plan.
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