Summary of the Actuarial Report on the 2021 Employment Insurance Premium Rate

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• List of abbreviations
• The Canada Employment Insurance Commission
• Recent EI program changes - COVID-19 pandemic
• 2021 Premium rate
• Actuarial report: Main findings

Pursuant to section 66.31 of the Employment Insurance Act, the Canada Employment Insurance Commission (the Commission) presents the summary of the Actuarial Report on the 2021 Employment Insurance (EI) Premium Rate.

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 80 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. These consultations are organised 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. 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 the Receiver General for Canada. The Commission, through the 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. This individual is an employee of the Office of the Superintendent of Financial Institutions (OSFI) and performs 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 is a Fellow of the Canadian Institute of Actuaries and of the Society of Actuaries. She is also a Director at OSFI, with over 15 years of actuarial experience.

Additionally, another key duty is that the Commission makes regulations with the approval of the Governor in Council. During the COVID-19 pandemic, the Commission is consulted regarding Interim Orders made by the Minister.

The Commission 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 Commission does so with the approval of the Governor in Council. This is among the Commission’s regulation-making powers under the Act. The Quebec Parental Insurance Plan (QPIP) replaces EI maternity and parental benefits for residents of Quebec. 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. This report fulfills its legislated responsibility to monitor and assess the impact and effectiveness of the benefits and other assistance provided for in the 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 to enter into Labour Market Development Agreements with each province and territory. This is done with the approval of the Minister of Employment and Social Development (ESD). Under these agreements, the Government of Canada provides contributions to provincial and territorial governments. The contributions are 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.

Recent EI program changes - COVID-19 pandemic

As part of the Government of Canada’s COVID-19 Economic Response Plan, the government announced the Canada Emergency Response Benefit (CERB). The Government also announced changes to the Work-Sharing program to support workers and employers affected by the global pandemic.

The CERB was implemented to support eligible workers by providing $500 a week for up 28 weeks for the period between March 15, 2020, and October 3, 2020. CERB was administered jointly under the Canada Emergency Response Benefit Act and under the EI Act as the EI Emergency Response Benefit (EI ERB). As a result of the implementation of the EI ERB:

• new EI regular and sickness benefit claims during this period were processed as claims for the EI ERB
• claims established prior to March 15, 2020, continued to be processed under the traditional EI rules
• EI special benefits, excluding EI sickness benefits, were processed as usual

Temporary Work-Sharing measures were introduced and are in place until March 14, 2021. These include:

• extending the maximum duration of agreements from 38 to 76 weeks
• waiving the mandatory waiting period
• expanding eligibility criteria, and
• streamlining the application process from 30 days to 10 days

The period of eligibility under the seasonal claimant pilot project was extended to include eligible claims established between May 30, 2020 and October 30, 2021. This measure provides up to 5 additional weeks of EI regular benefits to eligible seasonal claimants in 13 targeted EI economic regions.

Implementation of the following 2 EI components of the Canada Training Benefit has been delayed:

• the EI Training Support Benefit, designed to help workers cover their living expenses when they require time off work to pursue training, and
• the EI Premium Rebate for Small Businesses, designed to help offset the upward pressure on EI premiums resulting from the introduction of the new EI Training Support Benefit

In addition, a number of temporary measures are being introduced to help facilitate access to EI:

• a minimum unemployment rate of 13.1% will be applied for all EI regions beginning 9 August 2020 for 1 year. This will result in a uniform entrance requirement and a minimum entitlement to 26 weeks of EI regular benefits
• a credit of 300 insurable hours and a minimum weekly benefit rate of $400 for EI regular benefits, including work-sharing benefits
• a credit of 480 insurable hours and a minimum weekly benefit rate of $400 ($240 for extended parental benefits) for EI special benefits

The Government of Canada announced that it would be freezing the EI premium rate for 2021 at the 2020 premium rate.

The COVID-19 pandemic had a major impact on Canada’s labour market and as a consequence, some unexpected and exceptional charges related to the Government of Canada’s response to the pandemic accrued to the EI Operating Account. The CERB and temporary measures to support transition to the EI program are major contributors to these charges. It should also be noted that the Actuarial Report does not take into account the extension of the maximum duration of the CERB from 24 weeks to 28 weeks due to the timing of that announcement.

2021 Premium rate

The EI Senior Actuary has forecast the 7-year break-even rate for 2021 at $1.93 per $100 of insurable earnings. This is an increase of 35 cents from the 2020 rate of $1.58.

The increase in the 7-year break-even rate is mainly attributable to:

• the significant increase in unemployment as a result of the COVID-19 pandemic;
• as well as measures taken in response, including the EI ERB.

The actuarial forecast rests on a number of sensitive assumptions, some of which have a more significant impact on the 7-year forecast break-even rate. For example, a variation in the average unemployment rate of ±0.5% over the 2021 to 2027 period would result in a 7 cent increase/decrease in the 2021, 7-year forecast break-even rate. In addition, a variation in the premium rate of ± 1 cent would result in a $1.253 billion increase/decrease in the cumulative balance of the EI Operating Account at the end of the 7-year forecast period. The Commission hopes that additional sensitivity analysis will resume in subsequent reports.

As part of the Government economic response to COVID-19, the Government announced that it is freezing the EI premium rate for 2021 at the 2020 premium rate level of $1.58 per $100 of insurable earnings. For residents of Quebec, the premium rate for 2021 would be $1.18 per $100 of insurable earnings, 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 2021, the premium rate for employers will remain at $2.21 ($2.212 unrounded) per $100 of insurable earnings. For employers in Quebec, the premium rate for 2021 will be $1.65 ($1.652 unrounded) per $100 of insurable earnings.

Actuarial report: Main findings

Pursuant to section 66.31 of the Act, this summary presents the results of the EI Senior Actuary’s report in respect of the 2021 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.