Conservatives aim to cut down Employment Insurance surplus

TORONTO—The federal budget released by the Harper government in late February has a provision for removing a payroll irritant to businesses.

The Harper government has set up a system to end surpluses in the Employment Insurance fund going to unrelated purposes. It has created a Crown corporation to oversee EI, called the Canada Employment Insurance Financing Board.

The CEIFB will manage a special bank account into which will go annual EI surpluses, which will be invested until they are needed for EI payouts.
Meanwhile, starting next year, the annual increase in EI premiums will be capped at 15 cents per $100 of insurable earnings.

The government has given the CEIFB a start-up fund of $2 billion. This is a reserve to make up for any deficit that would arise when the 15-cent increase is not enough to make up for increased payments that have to be made when the economy takes a downturn and the unemployment rate increases.

In good times, EI premiums will go down when the government has built a surplus that is higher than a certain reserve level, which has not yet been set.

The CEIFB will determine EI premium rates for employers and employees, and will take into consideration any surplus or deficit in the EI fund, with the goal of operating the EI program on a break-even basis over time.

Under the system of setting EI premiums that has prevailed for years, Ottawa has been collecting more than it need to pay out EI benefits. In the past 16 years it has collected an estimated surplus of more than $50 billion.

The Canadian Restaurant and Foodservices Association applauded the federal government for its approach to EI.

“CRFA has vehemently opposed over-contributions by employers and employees to this insurance program for more than 15 years,” said CRFA executive vice-president of government affairs, in a release.

She added, “It is significant that this inappropriate practice is coming to an end, and with a sound governance structure for the new Crown corporation, this announcement should result in EI premium savings for both employers and employees.”

The CRFA release also takes note of a budget measure that addresses the serious labour shortage in Canada. The budget allows for an additional $22 million spending to speed up the processing of permanent resident applications, which would help increase the supply of foreign workers in Canada.

The budget also raised the amount retired people can earn without suffering a clawback of their Guaranteed Income Supplement, from $500 to $3,500 a year. This will encourage more retirees to work part-time to supplement their incomes.