EI Premium Reduction

EI Premium Reduction

Service Canada allows employers who provide their employees with a short-term disability plan (and if it meets certain requirements), a reduction in their Employment Insurance (EI) premiums from the standard rate of 1.4 times an employee’s EI premiums.

Evidence of the employer’s commitment to provide a short-terms disability plan is required, typically in the form of a policy contract. In addition, the employer must provide an undertaking that they will return 5/12th of the savings to the employees covered by their plan.  Service Canada will assign a reduction depending on the type the short-term disability plan falls under.

There are 2 ways to apply for an EI Premium Reduction and EI Premium Reduction can be applied for at any time.

Service Canada will determine the effective date depending on when the application is submitted & received.

Even if not all the required documents are available at the time the application is completed, the application should still be submitted to Service Canada as soon as possible.  As the effective date is based on the date the application is submitted, waiting for all documents to be received could affect the savings one receives.  After Service Canada receives the application, they will advise of any missing information or documentation.

If the application is approved, Service Canada will contact the client to verify if an additional payroll account number is required.  CRA does not allow employers to remit at different rates under the same payroll account number.  EI premium reduction will be specified in cents per $100 of insurable earnings (ie $0.33 per $100 insurable earnings).

If your STD plan doesn’t meet all requirements, Service Canada will advise what modifications need to be made so that it does.  If the plan is modified to meet requirements, copies of the amendment(s) will need to be sent to Service Canada.  If the plan does not qualify for an EI premium reduction, Service Canada will send a notice of non-entitlement.  Most STD plans that we recommend do qualify.

Service Canada will send notice that confirms the reduced EI premium reduction rate and the year to which it applies.

Employers must return the employee’s portion of the savings in the year in which the EI premium reduction is received or within 4 months of the following year.  This is frequently done by adding to the benefit plan.

Once you have been granted an EI premium reduction, the entitlement will continue until you change or cancel the approved plan.

If any changes are made to the employers existing approved plan the employer must notify Service Canada within 31 days of the change and apply for a continuation of the EI premium reduction and provide evidence that the employees will continue to benefit from the EI Premium Reduction. If the approved plan is cancelled, you must notify Service Canada within 30 days. If there is a major reorganization in the company (ie amalgamation or new ownership), Service Canada must be contacted immediately.

Please see the attached link to Service Canada’s Program Guide, FAQ’s, Application form, contact information, etc:

http://www.servicecanada.gc.ca/eng/cs/prp/0200_000.shtml