2020 Employment Insurance premium rate

From: Employment and Social Development Canada

The Canada Employment Insurance Commission

The Canada Employment Insurance Commission (the Commission), a departmental corporation named in Schedule II to the Financial Administration Act, administers the Employment Insurance Act (the Act). The objective of the Act is to provide employment insurance benefits and employment programs and services to eligible workers. The financial transactions relating to this objective are reported through the Employment Insurance Operating Account (the Account).

The Commission is a tripartite organization that has been overseeing the EI program for over 75 years. The Commission has 4 members, 3 of whom are voting 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 following consultation with their respective stakeholders. They are mandated to represent and reflect the views of their respective constituencies. The Deputy Minister of the Department of Employment and Social Development Canada (ESDC), representing government, is the Chairperson, while the Senior Associate Deputy Minister of the Department of ESDC and Chief Operating Officer for Service Canada is the Vice-Chairperson and has voting privileges only when acting on behalf of the Chairperson.

The EI Operating Account was established in the accounts of Canada by the Act. All amounts received under the Act are deposited in the Consolidated Revenue Fund and credited to the Account. The benefits and the costs of administration of the Act are paid out of the Consolidated Revenue Fund and charged to the Account. In the financial statements, the Consolidated Revenue Fund is represented by the Balance of the account with Receiver General for Canada. The Commission, through the officers and employees of the Department of Employment and Social Development (ESDC), is responsible for the delivery of the Employment Insurance program and the day to day administration of the Account.

A key duty of the Commission is setting the annual EI premium rate. The Department of Employment and Social Development Act requires 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, 2018, Ms. Annie St-Jacques was appointed as the Commission's Senior Actuary, EI Premium Rate Setting (EI Senior Actuary).  Ms. St-Jacques, who is a fellow of the Canadian Institute of Actuaries and of the Society of Actuaries, is a Director at OSFI with over 15 years of actuarial experience.

Among its regulation-making powers under the Act, the Commission, with the approval of the Governor in Council, is required to make regulations to provide a system to reduce employers’ and employees' premiums when payments under a provincial law would have the effect of reducing or eliminating the special benefits payable under the Act. The Quebec Parental Insurance Plan (QPIP) replaces EI maternity and parental benefits for residents of Quebec, and accordingly, the Commission establishes the premium reduction for employers and employees in respect of that plan.

In addition to its role in EI premium rate setting and related matters, the Commission produces the annual EI Monitoring and Assessment Report in fulfillment of its legislated responsibility 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. Legislated timelines govern the required tabling of the EI Monitoring and Assessment Report in Parliament.

The Act authorizes the Commission, with the approval of the Minister of Employment and Social Development (ESD), to enter into Labour Market Development Agreements with each province and territory. Under these agreements, the Government of Canada provides contributions to provincial and territorial governments to be used to pay for all or a portion of the costs of their benefits and measures provided they are similar to the employment benefits and support measures established under Part II of the Act. The contributions can also be used to pay for any administration costs incurred in providing these similar benefits and measures.

Premium rate setting

Since April 1, 2016, the Commission has been responsible for setting the annual EI premium rate according to a seven-year break-even mechanism, as forecast by the EI Senior Actuary. This is the premium rate that will result in a balance of $0 in 7 years in the EI Operating Account, including the elimination of any cumulative surplus or deficit in the Account. Annual changes to the premium rate are subject to a legislated limit of 5 cents. The seven-year break-even mechanism ensures stable and predictable premium rates for Canadian workers and employers, and is also intended to ensure that EI contributions are only used for EI purposes.

The Commission is also responsible for the publication of the annual Maximum Insurable Earnings (MIE), which is the income threshold up to which EI premiums are paid, 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).

To ensure transparency and accountability in the EI premium rate setting process, the EI Senior Actuary prepares an actuarial report forecasting the premium rate for the following year, based on the seven-year break-even mechanism. In turn, the Commission prepares a summary of that report and makes both the actuarial report and its summary available to the public on the day the premium rate is set. The EI Act also requires the Minister of Employment and Social Development to table the Actuary’s report and the Commission’s summary report in both Houses of Parliament within 10 sitting days of their publication.

Recent EI program changes

Over the last year, the following changes to the EI program have been implemented:

In addition, the Government of Canada announced the following measures in Budget 2019:

2020 premium rate

The EI Senior Actuary has forecast the seven-year break-even rate for 2020 at $1.58 per $100 of insurable earnings, a decrease of 4 cents from the 2019 rate of $1.62. For residents of Quebec, the premium rate for 2020 is forecast at $1.20, to account for the fact that the province administers its own parental insurance plan which partially offsets costs to the EI program.

Employers pay 1.4 times the employee premium rate. For 2020, the premium rate for employers is forecast at $2.21 ($2.212 unrounded) per $100 of insurable earnings, a decrease of 6 cents from the 2019 rate of $2.27 ($2.268 unrounded). For employers in Quebec, the premium rate for 2020 is forecast at $1.68.

The decrease in the seven-year break-even rate is mainly attributable to the lower than expected benefits payable in 2019 and the related changes in assumptions, along with the decrease in the forecast unemployment rate. This is partially offset by the slightly slower anticipated growth in earnings and the cost of the new EI Training Support Benefit proposed in Budget 2019.

The actuarial forecast rests on a number of sensitive assumptions, some of which have a more significant impact on the seven-year forecast break-even rate. For example, a variation in the average unemployment rate of ±0.5% over the 2020 to 2026 period would result in a 7 cent increase/decrease in the 2020 seven-year forecast break-even rate. In addition, a variation in the premium rate of ± 1 cent would result in a $1.219 billion increase/decrease in the cumulative balance of the EI Operating Account at the end of the seven-year forecast period.

To further illustrate the sensitivity of the seven-year forecast break even rate, the 2020 Actuarial Report includes tests, first introduced in the 2019 Report, which show how variations in the unemployment rate, labour force, average employment income and recipiency rate can impact the seven-year break-even rate and the balance of the Account. These tests provide a more comprehensive illustration of the long-term projection of the premium rate and the financial position of the account.

Actuarial Report: Main findings

Pursuant to section 66.31 of the Employment Insurance Act, this summary presents the results of the EI Senior Actuary’s report in respect of the 2020 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 premium reductions related to the QPIP and employer wage-loss plans under the PRP, as well as the annual MIE.

Premium rate:

QPIP premium reduction:

Premium Reduction Program:

Premium Reduction (per $100 of insurable earnings) for 2020
Category 1 Category 2 Category 3 Category 4
$0.22 $0.37 $0.36 $0.40

Maximum Insurable Earnings:

Maximum annual amounts of premiums payable by workers and employers (per employee) for 2020
Workers/employers Premium Rate (per $100 of insurable earnings) Maximum Annual Contribution Difference in Maximum Annual Contribution from 2019
Workers $1.58 $856.36 -$3.86
Employers $2.212 $1,198.90 -$5.41
Workers in Quebec $1.20 $650.40 -$13.35
Employers in Quebec $1.68 $910.56 $-18.69

Self-employed workers:

Canada Training Benefit

EI Operating Account projections:

Projection of the EI Operating Account ($ million)
Calendar year Premium rate (%) Net premiums Expenditures Annual surplus (deficit) Cumulative surplus (deficit) 31 December Revenues - Gross premiums after refunds Revenues - Reduction for WLP Revenues - Reduction for provincial plans Revenues - SBPR* Revenues - Other adjustments **
2018 1.66% 24,836 (968) (1,199) - 24 22,692 21,020 1,672 3,274
2019 1.62% 24,878 (997) (1,261) - (15) 22,605 21,758 847 4,121
2020 1.58% 24,945 (1,049) (1,329) (26) - 22,541 22,824 (283) 3,838
2021 1.58% 25,717 (1,100) (1,367) (26) - 23,224 24,206 (982) 2,856
2022 1.58% 26,527 (1,153) (1,407) (27) - 23,940 24,870 (930) 1,926
2023 1.58% 27,411 (1,191) (1,450) (28) - 24,742 25,132 (390) 1,536
2024 1.58% 28,269 (1,228) (1,531) (29) - 25,481 26,102 (621) 915
2025 1.58% 29,303 (1,273) (1,543) (29) - 26,457 26,732 (275) 640
2026 1.58% 30,364 (1,319) (1,595) (29) - 27,421 27,563 (142) 498

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