Part I - Plan requirements

Items under Part I from Identification of Employees Covered to Other Remuneration, inclusive, are mandatory (with the exception of SUB payments when an employee is not in receipt of EI benefits) and must appear in the plan description.

A sample SUB plan is found in Part II.

Identification of employees covered

The plan must identify the group(s) of employees covered e.g. all employees, hourly paid employees, employees at a certain plant or location, union group(s), etc. It may also identify an employee position e.g. accountant, administrator, lawyer, etc. Any employee may be covered; however, individuals must not be identified by name. When employees of affiliated companies are covered, the names of these companies must be included.

Types of unemployment

The plan must indicate that it covers unemployment caused by one or a combination of the following:

Temporary stoppage of work

SUB plans are intended for periods of unemployment caused by a temporary stoppage of work. Termination of employment caused by a re-organization or a shutdown of a plant or operation is not considered temporary unemployment. SUB payments may not form part of a separation package, be used to bridge to retirement, nor form any part of a work sharing agreement or short-week benefits.

Recall rights do not necessarily constitute a reason for determining a lay-off to be temporary. The employer should be able to estimate the date of the employee's return to work.

EI benefits paid for temporary lay-off are regular benefits and are paid to claimants who are available for, able to and looking for work. Claimants must continue to meet all EI requirements even though they are on temporary stoppage of work.

Training

Employees must be in receipt of Employment Insurance benefits.

Illness, injury or quarantine

The employee must be in receipt of EI sickness benefits.

Receipt of Employment Insurance (EI) benefits

The plan must indicate that the employee must apply for and be in receipt of EI benefits.

SUB payments when employee is not in receipt of EI benefits

Notwithstanding item Receipt of Employment Insurance (EI) benefits, the plan may provide SUB payments up to a maximum of 95% of the normal weekly earnings when the employee is not in receipt of EI benefits, and:

  • is serving the one-week EI waiting period*; or
  • has insufficient hours of insurable employment to qualify for EI benefits; or
  • has exhausted the EI benefit entitlement.

The employer decides which, if any, of the above situations are covered by the plan. If an employer introduces a SUB plan to offset the EI one-week waiting period* only, a complete description of the plan must be submitted for approval.

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

Supplemental Unemployment Benefit (SUB)

SUB payments

The SUB plan must indicate the value of the payments, either as a percentage of the employee's normal weekly earnings, or as a fixed amount.

The plan cannot provide that the SUB payment will be made in one lump sum payment; payments must be made periodically (i.e. weekly, bi-weekly).

The weekly SUB payment plus the weekly EI benefit rate applicable to this employment must not exceed 95% of an employee's normal weekly earnings*.

Note

Effective January 1, 2017, the Employment Insurance (EI) waiting period is reduced from two weeks to one week. It is possible that certain plans registered before January 1, 2017, continue to provide payments to their employees during the two-week EI waiting period, and therefore would no longer meet the combined employer and EI benefits allowable limit (95% of employee’s normal weekly earnings).

Some plans, as written, may require a payment amount in the week following the one-week waiting period that would now exceed the allowable limit in that week.

To mitigate the impact on employers and employees, a provision was added to the EI Regulations to increase the allowable limit in the week following the waiting period. This provision is for a transitional period of four years - from January 1, 2017, to January 2, 2021.

This allows plans of affected employers to continue to qualify as registered SUB plans while providing a period time for these employers to adjust their plans to meet the one-week waiting period. For employees, this prevents their EI benefits from being reduced in the week following the waiting period during the transitional period.

There are two acceptable methods of calculating the amount of SUB payments in order to meet the 95% requirement:

  • the gross weekly EI benefit (benefit rate) is deducted from the 95% calculation.
  • the EI benefit amount (after earnings are deducted) and any other money considered earnings are deducted from the 95% calculation.

At the present time, the basic EI benefit rate is equal to 55% of the employee's weekly insurable earnings up to a maximum payment of $562 per week. Changes to the basic rate of EI benefits could influence the amount of the SUB payments. The plan may provide for an automatic adjustment of the SUB payments when the EI rate is increased or decreased. It should be noted that the basic EI benefit rate can be altered based on the following:

  • a legislative change could increase or decrease the EI rate;
  • a family income supplement can increase the EI rate to more than 55% because the employee is in a low-income family and in receipt of the Canada Child Tax Benefit (CCTB). If the employee is entitled to receive the family income supplement, the EI rate will be adjusted automatically.

SUB calculation - No other earnings

Example 1: SUB payable when the employee is receiving regular, training or sickness benefits and has no other earnings.

  1. Employee's normal weekly earnings $1,000
  2. Employee's other earnings $0
  3. 95% of normal weekly earnings $950
  4. Maximum EI payment $562 Footnote 1
  5. Calculation of maximum SUB payment (C – D = E) $388

SUB calculation - Regular or training benefits plus other earnings

In any week of unemployment caused by temporary stoppage of work or training, a claimant is allowed to retain up to 50% of their earnings. Once the claimant has earned 90% of the average weekly earnings amount used to calculate their benefit rate, then the earnings are deducted dollar for dollar. The claimant must report all earnings. The employer may wish to consider these other earnings and the EI benefit amount when calculating the SUB payment. Refer to example 2 below for the difference in the SUB payments.

Note
Under Working While on Claim a claimant receiving any type of EI benefits will have 50% of their earnings deducted from their benefit rate. Once the claimant has earned 90% of their weekly earnings amount used to calculate their benefit rate, the earnings are deducted dollar for dollar from their benefits payable.

Example 2: The employee is receiving regular or training benefits and also has other earnings.

  1. Employee's normal weekly earnings $1,000
  2. Employee's other earnings $225
  3. Maximum EI payment $562 Footnote 1
  4. 50% of the earnings ($225 x 50%) $113
  5. EI benefit [C - D = E] [$562 -$113] $449

Scenario A: SUB payable without consideration of other earnings

(Sample Plan – Part II - item 5 option A or B)

  1. 95% of normal weekly earnings $950
  2. Maximum EI payment $562 Footnote 1
  3. SUB (A - B = C) $388

Scenario B: SUB payable if the employer includes other earnings and EI benefit

(Sample Plan – Part II - item 5 option C)

  1. 95% of normal weekly earnings $950
  2. EI Benefit (as per E above) $449 Footnote 1
  3. Other earnings $225
  4. SUB (A - B - C = D) $276

SUB calculation - Sickness benefits plus other earnings

If a claimant receives earnings during a period of absence from work because of illness, 100 % of the earnings (excluding registered SUB) are deducted from the EI benefits paid for that week. The claimant must declare all earnings. The SUB payment will be the same in both situations, as shown in example 3 below.

Example 3: The employee is receiving sickness benefits and has other earnings

  1. Employee's normal weekly earnings $1,000
  2. Employee's other earnings $225
  3. Maximum EI payment $562 Footnote 1
  4. EI benefit (C - B = D) ($562 - $225) $337

Scenario A: SUB payable without consideration of other earnings

  1. 95% of normal weekly earnings $950
  2. Maximum EI payment $562 Footnote 1
  3. SUB (A - B = C) $388

Scenario B: SUB payable if the employer includes other earnings and EI benefit

  1. 95% of normal weekly earnings $950
  2. EI Benefit (as per D above) $337 Footnote 1
  3. Other earnings $225
  4. SUB (A - B - C = D) $388

Benefit duration

The plan must indicate the maximum number of weeks for which the SUB payments will be payable. Some plans pay benefits for varying periods based on years of service, salary or employee groups. The Regulations do not set a minimum or maximum number of weeks for the payments.

Plan

Duration

The plan must indicate a start and end date.

Approval from the Service Canada-SUB Program must be received before the implementation date of the plan. The plan's duration must be at least one year; however, it can be in effect for up to five years. If the plan is contained within a collective agreement, it will be valid until the expiry date of the agreement.

Subsequent changes

The plan must indicate that a written notice of any change will be given to Service Canada-SUB Program within thirty (30) days of the effective date of the change. This also includes changes to the administrators or contact persons.

If there is a major reorganization in the company, such as a merger or a take-over, the employer must submit details of the changes including the new or updated plan description.

Financing

The plan must indicate the method used to finance the SUB payments. Financing is the sole responsibility of the employer and must be done in one of the following three ways:

  • by making the payments from the general revenues of the company;
  • by making deposits into a trust fund established to provide the SUB payments;
  • by paying 100% of the insurance premiums that are required to finance the SUB payments.

Separate records

The plan must indicate that the employer will keep a record of all SUB payments.

Other remuneration

Payments in respect of guaranteed annual remuneration, deferred remuneration or severance pay must not be reduced or increased by SUB received under the plan.

These amounts include any benefits to which the employee is entitled such as sick leave, vacation leave, commissions, bonus, etc.

Repayment of EI benefits

An employee whose net income (including EI and SUB) is above 1.25 times the maximum yearly insurable earnings may be required to repay some of the EI benefits received.

The employer may offset the repayment of EI benefits under the SUB plan. The amount of the offset when added to the previous payments (SUB and the gross EI benefits from that employment) must not exceed 95% of the employee's normal weekly earnings. Therefore, if the SUB plan has supplemented to 70%, the maximum amount of the offset cannot exceed 25% of the employee's normal weekly earnings multiplied by the number of weeks in which EI benefits were received.

The amount of repayment is calculated when the employee completes the Income Tax return and is based on a taxation year. For more information on repayment of EI benefits visit our Employment Insurance and Repayment of Benefits at Income Tax Time page on our website.

Trust fund

Termination clause

When the plan is administered through a trust fund, it must indicate that upon termination of the plan, all of the remaining assets will:

  • be reverted to the employer;
  • be used for ongoing payments under the plan; and/or
  • be used for the administration costs of the plan.

Vested rights

The plan must indicate that the employee has no vested right to SUB payments, except during periods of unemployment specified in the plan.

Note:

SUB plans may specify any other requirements imposed by the employer for the receipt of the SUB, e.g., the minimum period of employment required before payments are made; that the employee must return to work for a specified period after supplemental unemployment benefits are paid; conditions set by a collective agreement, etc.

The employer may provide for varying benefits (e.g. benefit duration, payments, type of coverage) for certain employee groups within the plan.

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