Estimated Impact of Recent Announcements on the 2021 7-Year Forecast Break-Even Rate and on the EI Operating Account

Document Properties

  • Type of Publication: Memorandum
  • Date: 28 September 2020
  • To: Commissioners of the Canada Employment Insurance Commission
  • From: Annie St-Jacques (Office of the Superintendent of Financial Institutions Canada)

In accordance with the Employment Insurance Act, the 2021 Actuarial Report on the Employment Insurance Premium Rate was submitted to the Canada Employment Insurance Commission (CEIC) on 21 August 2020. The estimates presented in the report were based on the Employment Insurance provisions as of 22 July 2020. They also took into account additional information received from Employment and Social Development Canada (ESDC) on 6 August 2020, including upcoming temporary measures. However, the estimates did not incorporate the following announcements:

  • Extension of the Canada Emergency Response Benefit (CERB), including the Employment Insurance Emergency Response Benefit (EI ERB), by an additional four weeks, for a maximum of 28 weeks rather than 24 (announced on 20 August 2020)
  • Crediting of the Employment Insurance Operating Account (EIOA) for costs related to the CERB/EI ERB (announced on 14 September 2020)

The CEIC asked the Actuary to evaluate the impact of these announcements on the results presented in the 2021 Actuarial Report. Here is a description of the impacts, followed by a summary of the results:

  • The 4-week extension of the CERB/EI ERB decreases the 2020 EI regular benefit payments forecasted in the 2021 Actuarial Report, as claimants receive the CERB/EI ERB rather than EI regular benefits. As a result, the recipiency rate assumption for 2020 was revised downward from 45% to 40%.
  • The credit to the EIOA for estimated costs related to the EI ERB amounts to the $36.2 billion that was charged to the account in the 2021 Actuarial Report (before the 4‑week extension).
  • Both announcements contribute to a deficit reduction in the EIOA as at 31 December 2020, which in turn decreases the 2021 7-year forecast break-even rate.
Reconciliation of the 2020 Annual EIOA Deficit and the 2021 7-Year Forecast Break-Even Rate
2020 Annual Deficit
($ million)
2021 7-Year Forecast
Break-Even Rate
(%)
2021 Actuarial Report – Before Announcements(40,963)1.93
4-week extension of the CERB/EI ERB1,455(0.01)
Crediting of the EIOA for costs related to the EI ERB36,200(0.29)
Revised Results – After Announcements(3,308)1.63

The table below shows a summary of the projected EIOA balances for 2020 and 2021 (based on a premium rate freeze for 2021 at the same level as 2020, i.e. 1.58%, as announced by the Government), taking into account the above-mentioned changes.

Summary of the EI Operating Account After Announcements
($ million)
Calendar YearPremium RatePremium RevenueExpendituresAnnual DeficitCumulative
Surplus/(Deficit)
31 December
20195,174
20201.58%20,90924,217(3,308)1,866
20211.58%22,57331,004 Table footnote*(8,431)(6,565)

Return to table footnote* Negligible difference with the amount shown in the 2021 Actuarial Report due to a slight increase in the bad debt expense.