EI Premium reduction guide Annex 1: Requirements for short-term disability plans

In order to be considered for an EI premium reduction, your short-term disability plan must meet certain requirements.

The following pages describe the requirements that apply to all short-term disability plans, as well as specific requirements that are unique to weekly indemnity plans and to cumulative paid sick leave plans.

A. Requirements that apply to all short-term disability plans

1. Employees must be eligible to claim benefits under the plan within three months

A new employee who belongs to a group of employees covered by the plan must be eligible to claim benefits on the first day of the month following the completion of three months of continuous employment.

Example: A new employee hired May 6, 2018, is entitled to claim benefits starting September 2, 2018.

Some plans are based on an "hour bank principle," where employees bank hours while working for a number of employers. In this case, a union hiring hall usually administers the employees' pay and benefits. These employees must become eligible to claim benefits on the first day of the month following the day the employee has accumulated 400 hours of active employment.

2. The waiting period for payment of benefits cannot be more than 7 consecutive days (see note)

Benefits under the short-term disability plan must be paid no later than the 8th day following the start of the employee's disability.

Note:

Effective January 1, 2017, the EI waiting period is reduced from two weeks to one week.

Short term disability plans that are registered with the Premium Reduction Program (PRP) may have an elimination period before the payment of benefits, similar to the EI waiting period.

To align with the EI one-week waiting period, a regulatory amendment was made to reduce the elimination period standard for short-term disability plans to a maximum of seven consecutive days (from 14 days), effective January 1, 2017.

Some employers may have existing qualifying plans that were in place prior to January 1, 2017, and which no longer meet the new standard. To mitigate the impact on these employers and their employees, the Government has put in place a four-year transitional period (from January 1, 2017 to January 2, 2021) to provide affected employers time to make adjustments to their short-term disability plan to meet the new standard. During the transitional period, they can continue to qualify to participate in the PRP and receive a premium reduction.

At the end of the transitional period, all affected employers’ short-term disability plans will need to be in compliance with the amended elimination period standard, in order to retain their premium reduction.

3. Benefits paid must be at least equal to the amount of benefits an employee would receive from the EI program

The weekly amount of benefits payable to employees under the plan must be at least equal to or exceed the amount of EI benefits that the EI program would pay.

For example, the basic EI benefit rate is 55% of a claimant's average insurable earnings, up to a yearly maximum insurable amount of $51,700 in 2018. This means that claimants can receive a maximum payment of $547 in EI benefits per week. Therefore, for 2018, the short-term disability plan must provide at least 55% of an employee's normal weekly insurable earnings, to a maximum of at least $547.

Please note the following

When calculating insurable earnings, employers must include any additional employment income the employee has earned on a regular basis, such as overtime, bonuses, and shift differentials.

The yearly maximum insurable earnings amount is reviewed each year. If an adjustment is made, it affects the maximum payment of EI benefits a person can receive. Therefore, if your plan provides a fixed maximum weekly amount of benefit that is equivalent to that offered by the EI program, your amount must be adjusted on or before January 15 of the year following the adjustment. This adjustment will ensure that the amount is still equal to or exceeds the amount of EI benefits an employee would receive from the EI program.

Example

On January 1, 2017, your short-term disability plan specified that the maximum amount of benefits payable per week was $543, which was the same maximum payable under the EI program.

On September 17, 2017, the EI program announced an increase of the maximum insurable earnings amount effective January 1, 2018 (from $51,300 to $51,700). As a result, the maximum weekly amount of EI benefits payable to claimants increased from $543 to $547.

To continue with your EI premium reduction, you will have to increase your amount of benefits payable to $547 per week on or before January 14, 2018. If you do not modify the amount, your plan will no longer meet the requirements to qualify for an EI premium reduction.

To avoid having to modify your plan every time the EI maximum insurable earnings amount is adjusted, you may choose to include a clause in your plan that will automatically upgrade the maximum benefit level to match any such increases in the EI yearly maximum insurable earnings amount.

4. The plan must be the first payer

The plan cannot allow an employee to claim EI benefits as part of its payment structure (that is, benefits under the plan cannot be integrated or coordinated with benefits that are paid under the Employment Insurance Act).

5. The plan must provide 24-hour coverage

The employees must be covered whether they are at work or not, even if they are injured while working at a second job. The plan must protect employees in both "occupational" and "non-occupational" environments, except in situations described in Item 6 below.

6. The plan can have certain limitations to the payment of benefits

A plan may contain some limitations to the payment of benefits that will not prevent the employer from qualifying for an EI premium reduction.

It is acceptable that benefits are not paid to an employee:

  • who is not under the care of a licensed physician;
  • whose illness or injury is covered by workers' compensation, the Canada Pension Plan, or the Quebec Pension Plan;
  • whose illness or injury is intentionally self-inflicted;
  • whose illness or injury results from service in the armed forces;
  • whose illness or injury results from war or participation in a riot or a disturbance of the public order;
  • whose illness or injury occurs while on leave of absence or paid vacation;
  • who is receiving maternity, parental, compassionate care or family caregiver benefits under the Employment Insurance Act;
  • who is ill or injured as a result of committing a criminal offence;
  • who is engaged in employment for wage or profit while receiving disability benefits;
  • who is ill or injured during a strike or lockout at the place of employment (if the right to benefits is reinstated on the employee's return to active employment);
  • who is serving a prison sentence;
  • who is not entitled to EI income benefits payable because he or she is outside Canada;
  • whose illness results from the use of drugs or alcohol and who is not receiving continuing treatment for the use of these substances;
  • whose illness results from an illness or injury from a motor vehicle accident and who receives benefits under a provincial motor vehicle insurance plan that does not take EI benefits payable into account when paying their benefits;
  • who receives a retirement pension from the same employer;
  • who has plastic surgery solely for cosmetic purposes, except where attributable to illness or injury; or
  • who, in the case of a recurring disability, is receiving benefits according to a reinstatement provision of a group long-term disability plan (as long as the reinstatement period does not exceed six months).

B. Requirements specific to weekly indemnity plans

In addition to the requirements explained in Part A above, weekly indemnity plans must also meet the following requirements:

1. Benefit duration

Weekly indemnity plans must pay benefits until the earliest of the following:

  • the payment of at least 15 weeks of benefits;
  • the end of the period of incapacity due to illness or injury;
  • the date the employee retires; or
  • the date of separation from employment for any reason other than illness or injury, if the notice of separation was given prior to the beginning of the illness or injury.

Special weekly indemnity plans (for provincial/territorial or para-public employers) must pay benefits until the earliest of the following:

  • the payment of at least 52 weeks of benefits;
  • the end of the period of incapacity due to illness or injury;
  • the date the employee retires; or
  • the date of separation from employment for any reason other than illness or injury, if the notice of separation was given prior to the beginning of the illness or injury.

2. Reinstatement of benefits following the end of a disability

Weekly indemnity plans must provide reinstatement of full benefits to an employee within a specified period of time for new and recurring disabilities - that is, at least 15 weeks of benefits must be again available to an employee who returns to work following the end of an illness or injury.

The requirements for reinstatement are as follows:

  • If the subsequent disability is new, full benefits must be reinstated no later than one month after the employee returns to work.
  • If the subsequent disability is a recurrence of an earlier one, full benefits must be reinstated no later than three months after the employee returns to work.

For a plan based on an hour-bank principle, the requirements are as follows:

  • If the subsequent disability is new, full benefits must be reinstated when the employee accumulates no more than 150 hours of active employment.
  • If the subsequent disability is a recurrence of an earlier one, full benefits must be reinstated when the employee accumulates no more than 400 hours of active employment.

Special weekly indemnity plans (for provincial/territorial or para-public employers) must provide for the reinstatement of a full 52 weeks of benefits to an employee no later than one month after the employee returns to work for both new and recurring disabilities.

C. Requirements specific to cumulative paid sick leave plans

In addition to the requirements explained in Part A, cumulative paid sick leave plans must also meet the following requirements:

1. Accumulation of sick leave credits

Paid sick leave plans must provide one or more days of paid sick leave per month of continuous employment and allow for a minimum accumulation of 75 days. The plan may also allow for the use of sick leave credits while remaining at home because of pregnancy, to care for a newborn or newly adopted child, or to provide care or support to a gravely ill family member or to a critically ill child.

Sick leave credits that are in excess of this minimum 75-day requirement may be used for other reasons (for example, taking a family member to a medical appointment). This is acceptable as long as at least one day per month (12 days per year) is maintained to be used only in cases of an employee's illness or injury and, if the plan allows it, while the person remains at home because of pregnancy, to care for a newborn or newly adopted child, or to provide care or support to a gravely ill family member or to a critically ill child.

Enhanced paid sick leave plans must provide one and two-thirds days or more of paid sick leave per month of continuous employment and allow for a minimum accumulation of 125 days. The plan may also allow for the use of sick leave credits while remaining at home because of pregnancy, to care for a newborn or newly adopted child, or to provide care or support to a gravely ill family member or to a critically ill child.

Sick leave credits that are in excess of this minimum 125-day requirement may be used for other reasons (for example, taking a family member to a medical appointment). This is acceptable as long as at least 20 days per year are maintained to be used only in cases of an employee's own illness or injury and, if the plan allows it, while remaining at home because of pregnancy, to care for a newborn or newly-adopted child, or to provide care or support to a gravely ill family member or to a critically ill child.

Both paid sick leave and enhanced paid sick leave plans may allow days to be prorated based on the number of hours an employee has worked in a particular month.

When employers first apply for an EI premium reduction, their sick leave plan must have allowed for a possible accumulation of 72 days of paid sick leave credits (for a paid sick leave plan) or 120 days of paid sick leave credits (for an enhanced paid sick leave plan) in the six years preceding the date of application or since the plan was put in place, whichever is the shorter period. When the amount has not been achieved on the date of the application for the premium reduction, employers will be required to provide additional credits.

Example

A paid sick leave plan provides an accumulation of one day per month (12 days per year). On the date of the initial application, the plan has been in effect for five years. This means an employee who has been covered by the plan from the beginning could have accumulated 60 days of paid sick leave. In this case, the employer would be required to credit all employees with 12 more days of paid sick leave credits to achieve the 72 days necessary to meet the requirements.

2. Benefit duration

The plan must pay benefits until the earliest of:

  • the payment of 75 days of sick leave for a paid sick leave plan or 125 days of sick leave for an enhance paid sick leave plan;
  • the end of the period of incapacity due to illness or injury;
  • the exhaustion of all accumulated paid sick leave;
  • the date the employee retires; or
  • the date of separation from employment for any reason other than illness or injury, if the notice of separation was given prior to the beginning of the illness or injury.

3. Deferral of sick leave

For temporary employees or new employees who are still subject to a probationary period, the employer may defer the use of paid sick leave credits for a period of no longer than 12 months, beginning on the day the employee started employment or joined the plan.

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