# 2023 Actuarial Report on the Employment Insurance Premium Rate

Date: 22 August 2022

## Commissioners of the Canada Employment Insurance Commission

Dear Commissioners,

Pursuant to section 66.3 of the Employment Insurance Act, I am pleased to submit the 2023 report, which provides actuarial forecasts and estimates for the purposes of sections 4, 66 and 69 of the Employment Insurance Act.

The estimates presented in this report are based on the Employment Insurance provisions and proposed program changes as of 22 July 2022.

Yours sincerely,

Mathieu Désy, FCIA, FSA
Senior Actuary, Employment Insurance Premium Rate-Setting
Office of the Chief Actuary
Office of the Superintendent of Financial Institutions Canada

## 1. Executive Summary

### 1.1. Main Findings

2023 2022 \$61,500 \$60,300 1.74% 1.81% 0.36% 0.38% \$1,345 million \$1,209 millionTable 0 footnote ** Category 1: 0.25% Category 2: 0.39% Category 3: 0.39% Category 4: 0.42% Category 1: 0.23% Category 2: 0.36% Category 3: 0.36% Category 4: 0.39% Category 1: 1.249 Category 2: 1.160 Category 3: 1.163 Category 4: 1.140 Category 1: 1.257 Category 2: 1.172 Category 3: 1.172 Category 4: 1.151 Category 1: 1.206 Category 2: 1.092 Category 3: 1.096 Category 4: 1.066 Category 1: 1.211 Category 2: 1.100 Category 3: 1.100 Category 4: 1.072 The Government froze the EI premium rate for 2021 and 2022 at the 2020 premium rate level of 1.58%. Moreover, the Employment Insurance (EI) premium rate is limited to an annual increase or decrease of 0.05%, as per the EI Act. Therefore, in accordance with this Act, the 2023 EI premium rate would be 1.63%Table 0 footnote ***. Employers pay premiums at the rate of 1.4 times those of employees, prior to any premium reduction granted to employers who sponsor a qualified wage-loss plan. The reduced employer multipliers are shown above. Table 0 Footnotes Table 0 footnote *This is the rate that would generate sufficient premium revenue during the next 7-year period to pay for the expected expenditures over that same period and to eliminate the projected deficit/surplus that has accumulated in the EI Operating Account as of 31 December of the preceding year. The methodology is explained in Section 3.Table 0 footnote **Revised from \$1,159 million in the previous report as it is based on updated earnings data.Table 0 footnote ***The Commission is responsible for setting the premium rate. It may set a premium rate that is different than the one shown in this report. More information on the rate setting process along with the inherent deadlines can be found in Appendix A.

The estimates in this report are based on the EI provisions as of 22 July 2022, on the information provided on or before 22 July 2022 by the Minister of Employment and Social Development (ESD) and the Minister of Finance, and on the methodology and assumptions developed by the Actuary.

Accordingly, a premium rate corresponding to the 7-year forecast break-even rate (1.74%) from 2023 to 2029 would balance out the EI Operating Account at the end of 2029Footnote 1.

Table 1 below shows the status of the EI Operating Account for 2021, as well as its projected evolution for 2022 and 2023. This is based on a premium rate freeze for 2022 at the same level as 2020 (i.e. 1.58%) and on the application of the 0.05% limit to the annual premium rate change for 2023 (i.e. 1.63%).

Table 1 Summary of the EI Operating Account (\$ million)
20211.58%N/AN/AN/A(25,865)
20221.58%26,10227,492(1,390)(27,255)
20231.63%27,78025,7382,042(25,213)

It is important to note that the figures related to future expenditures and earnings base included in this report are projections, and eventual differences between future experience and these projections will be analyzed and considered in subsequent reports.

### 1.2. Purpose of the Report

This Actuarial Report prepared by the Actuary, Employment Insurance Premium Rate-Setting, is the tenth report to be presented to the Canada Employment Insurance Commission (Commission) in compliance with section 66.3 of the Employment Insurance Act (“EI Act”).

The Actuary is a Fellow of the Canadian Institute of Actuaries who is an employee of the Office of the Superintendent of Financial Institutions and who is engaged by the Commission to perform duties under section 66.3 of the EI Act. Pursuant to this section, the Actuary shall prepare actuarial forecasts and estimates for the purposes of calculating the maximum insurable earnings (MIE) under section 4 of the EI Act, the employment insurance (EI) premium rate under section 66 of the EI Act, and the premium reductions under section 69 of the EI Act for employers who sponsor qualified wage-loss plans, and for employees and employers of a province that has established a provincial plan. The actuary shall also, on or before 22 August of each year, provide the Commission with a report that sets out:

• the forecast premium rate for the following year and a detailed analysis in support of the forecast;
• the calculations performed for the purposes of sections 4 and 69 of the EI Act;
• the information provided under section 66.1 of the EI Act; and
• the source of the data, the actuarial and economic assumptions and the actuarial methodology used.

The purpose of this report is to provide the Commission with all the information prescribed under section 66.3 of the EI Act. The Commission shall, on or before 14 September, make available to the public this report along with the summary of this report. More information on the rate setting process along with the inherent deadlines can be found in Appendix A.

### 1.3. Scope of the Report

Recent program changes and announcements are summarized in Section 2.

The methodology used in determining the 7-year forecast break-even rate, including the premium rate reduction for employees and employers of a province that has established a provincial plan such as Québec, and the reduction in employer premiums due to qualified wage-loss plans, is summarized in Section 3.

Section 4 provides an overview of the key assumptions used in projecting insurable earnings and EI expenditures, while Section 5 presents the main results, including the calculation of the 2023 EI 7-year forecast break-even rate and the projection of the EI Operating Account. Sensitivity tests on the main assumptions are outlined in Section 6.

A reconciliation between the 2022 and 2023 EI 7-year forecast break-even rates is presented in Section 7.

Concluding remarks and the actuarial opinion are presented in Section 8 and Section 9, respectively. The various appendices provide supplemental information on the EI program and on the data, assumptions and methodology employed. Detailed information on the calculation of the maximum insurable earnings (MIE) is presented in Appendix C.

### 1.4. Sensitivity of the 7-Year Forecast Break-Even Rate

Two of the most relevant assumptions used to determine the 7-year forecast break-even rate are the unemployment rate, which is provided by the Minister of Finance, and the recipiency rate, which is projected by the Actuary.

Section 6 presents the sensitivity tests. They can be summarized as follows:

• a variation in the average unemployment rate of 0.5% over the period 2023-2029 would result in an increase/decrease of about 0.07% in the 2023 EI 7-year forecast break‑even rate;
• a variation in the average recipiency rate of 5% over the period 2023-2029 would result in an increase/decrease between 0.04% and 0.05% in the 2023 EI 7-year forecast break-even rate; and
• a variation in the premium rate of 0.01% of insurable earnings would result in a \$1,471 million increase/decrease in the cumulative balance of the EI Operating Account at the end of the 7‑year forecast period.

### 1.5. Conclusion

The main results of this report are as follows:

• The 2023 MIE is \$61,500, based on the methodology detailed in the EI Act and the relevant economic data.
• The 7-year forecast break‑even rate for 2023 is 1.74% of insurable earnings.
• The 2023 QPIP reduction is 0.36%.
• The 2023 premium reduction for employers who sponsor qualified wage-loss plans is estimated at \$1,345 million.

A reconciliation of the 7-year forecast break-even rate, from 1.81% in the 2022 Actuarial Report to 1.74% in the current report, is shown in Section 7. The decrease between the rate of 1.81% and 1.74% is mainly attributable to revisions to the cost of the temporary measures as well as to reductions in projected regular benefits due to lower expected unemployment rates in this report.

The Government announced, as part of Budget 2022, that the two-year EI premium freeze at the 2020 premium rate level of 1.58% will end in 2023. Moreover, the EI premium rate is limited to an annual increase or decrease of 0.05%, as per the EI Act.Consequently, the 2023 premium rate would be equal to:

• 1.63%Footnote 2 of insurable earnings for residents of all provinces except Québec; and
• 1.27% of insurable earnings for residents of Québec, after taking into account the QPIP reduction of 0.36%.

## 2. Recent Program Changes and Announcements

Budget 2022 announced that the two-year freeze to the EI premium rate will end in 2023.

The temporary measures announced in Budget 2021 to facilitate access to EI in response to the COVID-19 pandemic are summarized below. These measures are in effect from 26 September 2021 until 24 September 2022. Other measures temporarily impacting EI claims are presented in Appendix D.

• A uniform entrance requirement of 420 insurable hours for eligibility to EI regular and special benefits.
• A common entrance requirement of \$2,500 in earnings for fishers to qualify for fishing benefits.
• A reduced entrance requirement of \$5,289 in earnings to access special benefits for self-employed workers who have opted in to the EI program.
• Ensuring that all insurable hours and employment count towards a claimant’s eligibility, as long as the last job separation is found to be valid.
• Allowance for claimants to start receiving EI benefits sooner by simplifying rules around the treatment of severance, vacation pay, and other monies paid on separation.

### 2.3. Work-Sharing

Several temporary special Work-Sharing measures were introduced to support employers and workers affected by COVID-19. Changes include extending the duration of Work-Sharing agreements, waiving the mandatory cooling off period, expanding eligibility criteria and streamlining the application process. The temporary measures were initially in place from 15 March 2020 to 14 March 2021 and they were extended until 24 September 2022 in Budget 2021.

### 2.4. Seasonal Claimants

Budget 2018 first introduced a seasonal claimants’ pilot project to provide up to five additional weeks (to a maximum of 45 weeks) of EI regular benefits to eligible seasonal claimants in 13 targeted EI economic regions. The additional five weeks of benefits were originally available for claims established between 5 August 2018 and 30 May 2020. The period for the pilot project was then extended to include eligible claims established between 30 May 2020 and 25 September 2021. Subsequently, the temporary support for seasonal claimants was extended by one year through legislation in Budget 2021, to ensure continued support during the pandemic. Budget 2022 extended these rules until October 2023.

### 2.5. Sickness Benefits

Budget 2021 announced the enhancement of sickness benefits from 15 to 26 weeks. This extension will take effect by the end of 2022.

### 2.6. Training Benefit

Employment and Social Development Canada indicated that the implementation of the new EI Training Support Benefit (part of the Canada Training Benefit) originally announced in Budget 2019 and proposed to be launched in late 2020 would be delayed. The benefit components are:

• 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.

### 2.7. Other

Budget 2022 announced the following changes:

• Amendments to Part II of the EI Act to broaden client and program eligibility and the types of interventions funded under Labour Market Development Agreements with provinces and territories.
• Establishment of the EI Board of Appeal, originally announced in 2019, to replace the current EI appeals process under the Social Security Tribunal General Division.

## 3. Methodology

In accordance with subsection 66(1) of the EI Act, the Commission shall set the premium rate each year in order to generate just enough premium revenue during the next seven years to ensure that at the end of this seven-year period, the total of the amounts credited to the EI Operating Account after 31 December 2008 is equal to the total of the amounts charged to that Account after that date. This calculated premium rate is referred to as the 7-year forecast break‑even rate.

Based on relevant assumptions, the 2023 EI 7-year forecast break-even rate is the premium rate that is expected to generate sufficient premium revenue to ensure that at the end of 2029, the EI Operating Account balance is \$0. It is therefore based on:

• the projected balance of the EI Operating Account as of 31 December 2022; and
• the projection over a period of seven years of:
• the earnings base;
• the EI expenditures;
• the amount of premium reductions granted to employers who sponsor a qualified wage-loss plan; and
• the amount of premium reductions granted to employees and employers of a province that has established a provincial plan.

The projected rebate amounts for small businesses related to the new EI Training Support Benefit expected to be launched in 2023 are also considered.

The earnings base represents the total insurable earnings on which salaried employees and their employers pay EI premiums, and the earnings on which self‑employed individuals that opted into the EI program pay EI premiums. Prior to an adjustment to reflect employee premium refunds, the employer portion of the earnings base is equal to 1.4 times the employee portion of the earnings base.

For purposes of determining the 7-year forecast break-even rate, the earnings base and EI expenditures are projected over a seven‑year period.

The base year for the earnings base is 2020, which is the most recent year for which fully assessed T4 slips (Statement of Remuneration Paid) data are available. However, for certain assumptions, the 2021 partially assessed information is used. Complete data for 2021 will not become available until January 2023.

EI benefits are projected from actual 2021 benefits paid (base year) but adjusted based on the first six months of known data for 2022 and realigned in year 2023 to the expected experience as if projected from actual benefits paid in 2019Footnote 3

The earnings base and EI expenditures are projected from the base year using:

• Data and assumptions provided by the Minister of Employment and Social Development (ESD), including prescribed information as set out in section 66.1 of the EI Act (presented in Table 26, Appendix D);
• Assumptions and forecasts provided by the Minister of Finance in accordance with section 66.2 of the EI Act (presented in Table 27, Appendix D);
• Methodology and other assumptions developed by the Actuary.

In accordance with section 69 of the EI Act and related regulations, premium reductions are granted to employers who sponsor a qualified wage-loss plan as well as to employees residing in a province that has established a provincial plan and their employers. In addition, Budget 2019 proposed a Small Business Premium Rebate (related to the new EI Training Support Benefit and expected to be launched in 2023). The expected amounts of these premium reductions and rebate over the next seven years are included in the EI expenditures for purposes of determining the 7-year forecast break-even rate.

EI premiums paid by the employer are equal to the employer multiplier times the premiums deducted by the employer on behalf of its employees. Generally, the employer multiplier is equal to 1.4. However, pursuant to subsection 69(1) of the EI Act, the employer premiums can be reduced through a lower employer multiplier when its employees are covered under one of four types of qualified wage-loss plans which reduce EI special benefits otherwise payable. The 2023 premium reductions for those employers are determined in accordance with subsection 69(1) of the EI Act and related regulations. They are based on the methodology and assumptions developed by the Actuary.

Québec is currently the only province that has established a provincial plan through the Québec Parental Insurance Plan (QPIP) which has been providing maternity and parental benefits to Québec residents since 1 January 2006. In accordance with subsection 69(2) of the EI Act and related regulations, a mechanism to reduce EI premiums paid by Québec residents and their employers was introduced. The 2023 reduction for Québec residents and their employers is determined in accordance with legislation and based on a methodology and on assumptions developed by the Actuary. The reduction is granted through a reduced premium rate. For 2023, this reduction is referred to as the 2023 QPIP reduction.

More information on the methodology used for calculating the 7-year forecast break-even rate and the premium reductions for 2023 is provided in Appendix B.

## 4. Assumptions

This section provides a brief overview of the main assumptions used in projecting the variables included in the calculation of the 7-year forecast break‑even rate. The section is broken down into two subsections: assumptions related to the projected earnings base and assumptions related to the projected expenditures. More detailed information and supporting data are provided in Appendix D.

### 4.1. Earnings Base

The earnings base is detailed in the denominator of the formula for the 7-year forecast break-even rate and the QPIP reduction developed in Appendix B. The earnings base is comprised of:

• the total insurable earnings on which employers pay EI premiums prior to any adjustment for wage-loss plans or provincial plans;
• the total insurable earnings on which employees pay EI premiums adjusted to reflect employee premium refunds; and
• the earnings on which self‑employed individuals that opted into the EI program pay EI premiums.

The main assumptions used in determining the earnings base are presented in Table 2 below.

2021 2022 2023 2024 2025 2026 2027 2028 2029 3.87% 7.10% 1.99% 5.85% 3.53% 2.82% 2.89% 2.95% 2.72% 5.68% 1.87% 0.45% 0.21% 0.33% 0.20% 0.03% 0.36% 0.56% 2.90% 6.29% 3.39% 2.67% 2.91% 2.86% 2.77% 2.82% 2.82% 8.74% 8.28% 3.85% 2.89% 3.25% 3.06% 2.80% 3.19% 3.39% 9.25% 9.08% 3.00% 4.68% 3.59% 3.04% 2.87% 3.25% 3.34% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 2.42% 2.42% 2.42% 2.42% 2.42% 2.42% 2.42% 2.42% 2.42% 44% 17% 7% 7% 7% 7% 6% 6% 6% 45% 17% 8% 7% 7% 7% 7% 7% 6% 40% 15% 6% 5% 5% 5% 5% 5% 5% Table 2 Footnote Table 2 footnote *Provided by the Minister of Finance.

#### 4.1.1. Maximum Insurable Earnings

The MIE represents the income level up to which EI premiums are paid and up to which EI benefits are calculated and is a key element in determining the earnings base. Section 4 of the EI Act provides details on how to determine the yearly MIE. In accordance with this section, the MIE increases annually based on increases in the average weekly earnings, as reported by Statistics Canada.

The 2023 MIE is equal to \$61,500, which represents a 2.0% increase from the 2022 MIE of \$60,300. The projected MIE for years 2024 to 2029 are calculated based on estimates of the average weekly earnings provided by the Minister of Finance. Detailed explanations and calculations of the 2023 MIE are provided in Appendix C.

#### 4.1.2. Number of Earners

The number of earners and their distribution across income ranges is used to determine the earnings base of salaried employees. The projected number of employees per year, which is based on an average of the number of employees per month, is provided by the Minister of Finance. The total number of earners for a year is higher than the number of employees provided given that the number of earners includes all individuals who had earnings at any time during the year rather than an average per month.

The preliminary number of earners for the year 2021 is set such that the resulting insurable earnings are in line with the expected assessed premiums for 2021, which are derived from the 2021 year-to-date assessed premiums and the 2021 increase in average employment income provided by the Minister of Finance. The projected number of earners from 2022 to 2029 is derived from a regression analysis based on the historical number of earnersFootnote 4 and number of employeesFootnote 5.

The number of earners is expected to increase by 5.68% in 2021 and by 1.87% in 2022. The average annual increase for the following seven years is 0.30%. The projected distribution of earners as a percentage of average employment income is based on the 2020 distribution.

#### 4.1.3. Average and Total Employment Income

The increase in average employment income, combined with the increase in the number of earners, is used to determine the increase in total employment income. The 2020 distribution of the total employment income across income ranges is used to determine the future distribution of total employment income.

The increase in average employment income is provided by the Minister of Finance and is expected to be 2.90% and 6.29% in 2021 and 2022 respectively. The average annual increase for the following seven years is 2.89%.

Based on these increases in average employment income and the expected variations in the total number of earners, the total employment income is expected to increase by 8.74% in 2021 and by 8.28% in 2022. Those variations are due to the economic recovery from the COVID-19 pandemic. The average annual increase for the following seven years is 3.20%.

#### 4.1.4. Total Insurable Earnings

The total insurable earnings of salaried employees are equal to the total employment income, up to the annual MIE, earned by a person employed in insured employment. They are used to determine the earnings base for salaried employeesFootnote 6.

The earnings base for salaried employees is equal to 2.4 times the total insurable earnings since employee premiums are based on their total insurable earnings and employer premiums are generally equal to 1.4 times the employee premiums, for a combined total of 2.4.

Historical information regarding total insurable earnings is derived from aggregate assessed premiums gathered from T4 slips (provided by CRA) of all salaried employees. For employees with multiple employments in the year, this information is based on the combined total EI premiums. This means that, although insurable earnings of each employment are capped at the MIE, the combined total insurable earnings can exceed the MIE. The adjustment to insurable earnings and the earnings base reflecting multiple employments is captured in the employee premium refund section below.

The expected total employment income capped at the annual MIE for 2021 to 2029 is derived from:

• the 2020 distribution of the total employment income;
• the 2020 distribution of the total number of earners as a percentage of average employment income; and
• the expected increases in these variables.

Based on this methodology, the total insurable earnings, before any adjustment for premium refunds, are expected to increase by 9.25% in 2021 and by 9.08% in 2022. The average annual increase for the following seven years is 3.40%. For 2021, the resulting insurable earnings reflect the year-to-date assessed premiums and related total expected assessed premiums for 2021. The significant increases in 2021 and 2022, are attributable to the economic recovery from the COVID-19 pandemic.

#### 4.1.5. Split of Total Insurable Earnings Due to Provincial Plan

For the purposes of determining the reduction that applies to residents of a province with a provincial plan, the earnings base for salaried employees must be split between residents of provinces with and without a provincial plan. The only province that currently has a provincial plan is Québec. Therefore, the earnings base for salaried employees must be split based on the province of residence (between out-of-Québec residents and Québec residents).

The information used to derive historical insurable earnings provided by CRA is on a T4 basis and is therefore based on the province of employment. The historical distribution of insurable earnings on a T4 basis shows that the proportion of insurable earnings that relates to employment in Québec generally decreased until 2015; between 2015 and 2020, a slight increase was observed. Based on the historical pattern, it is expected that the proportion of insurable earnings that relates to employment in Québec will reach 22.7% in 2021, and will slightly decrease over the 7-year projection period, but will remain close to 22.5%.

The information on historical assessed premiums provided by CRA includes adjustment payments made between the Government of Canada and the Government of Québec each year to reflect the province of residence rather than the province of employment of each employee. These adjustment payments are the object of an administrative agreement between both parties and can be used as a basis to adjust the distribution of insurable earnings to reflect the province of residence.

The methodology used in adjusting the distribution of insurable earnings based on aggregated adjustment payments was validated against administrative data. The administrative data were provided by CRA and are part of the annual exchange of information between the Government of Canada and the Government of Québec.

Based on information provided by CRA, the net annual transfer of insurable earnings on a T4 basis to reflect the actual province of residence was on average 0.25% of total insurable earnings for the last three years of available data (2018 to 2020) with the transfer of insurable earnings on a T4 basis going to Québec from the rest of Canada. It is assumed to remain at 0.25% of total insurable earnings until 2029.

In general, salaried employees contribute EI premiums on their total insurable earnings in a given tax year up to the annual MIE. However, when filing their tax returns, some employees may exceed the maximum contribution and receive a refund of all or a portion of the EI premiums paid in the year (e.g., employees with multiple employers in the same year and employees with insurable earnings below \$2,000). The insurable earnings that are subject to any subsequent premium refund must be excluded from the earnings base.

Given that the data used for projection purposes (T4 slips) include insurable earnings for which premiums may later be refunded, an adjustment must be made to reduce the earnings base. It is important to note that the employer does not receive a refund. Thus, only the employee’s portion of the total earnings base is adjusted, which is reflected in the formulas presented in Appendix B.

The historical data provided by CRA show that the total insurable earnings subject to a subsequent employee refund as a percentage of total insurable earnings is relatively stable. Based on the average for the last five years of available data (2016 to 2020) this percentage is assumed to be 2.42% from 2021 to 2029.

#### 4.1.7. Self-Employed Earnings

Since 31 January 2010, self‑employed workers may voluntarily opt into the EI program to receive EI special benefits for those who are sick, pregnant or caring for a newborn or adopted child and for those caring for a critically ill or injured family member (family caregiver benefit) or at end-of-life (compassionate care benefit). Although self-employed residents of Québec can access maternity and parental benefits through their provincial plan, they may voluntarily opt into the EI program to access other special benefits. As such, the earnings base used in calculating the forecast break-even rate must consider the covered earnings of self-employed individuals who opt into the EI program.

Self-employed individuals who participate in the EI program contribute premiums based on their self-employed earnings, up to the annual MIE, at the employee rate that corresponds to their province of residence, and there are no employer premium contributions. Therefore, as with the insurable earnings of salaried employees, self-employed covered earnings must be split between out-of-Québec residents and Québec residents.

The increase in self-employed earnings reflects the expected increase in the number of participants and in the average earnings of self-employed individuals.

The projected number of participants is based on historical enrolment information, adjusted to reflect expected future changes in enrolment. The increase in average earnings is assumed to be the same as the one for salaried employees.

Based on this methodology, the covered earnings of all self-employed individuals are expected to increase on average by 7% per year from 2023 to 2029. It is worth noting that 2021 and 2022 show respective increases of 44% and 17% in total covered self-employment earnings. This can most likely be attributed to the COVID‑19 pandemic.

### 4.2. Expenditures

EI Part I benefits are projected from actual 2021 benefits paid (base year) but adjusted based on the first six months of known data for 2022 and realigned in year 2023 to the expected experience as if projected from actual benefits paid in 2019Footnote 3.

Table 3 presents a summary of the key expenditure assumptions used in this report, followed by a short description for each of them. A detailed description of the methodology used to project all benefits is available in Appendix D.

2021 2022 2023 2024 2025 2026 2027 2028 2029 2.4% 1.7% 0.9% 0.7% 0.6% 0.6% 0.4% 0.7% 0.8% 7.4% 5.4% 5.6% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 3.0% 5.6% 3.8% 2.9% 2.9% 2.8% 2.8% 2.8% 2.8% 1.9% 9.0% 3.9% 4.6% 3.3% 2.8% 2.9% 2.9% 2.8% 63.4% 49.8% 52.0% 54.5% 56.0% 55.5% 55.0% 55.0% 55.0% 95.3% 87.5% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 52.2 52.0 52.0 52.4 52.2 52.2 52.2 52.0 52.2 37.9% 44.3% 47.2% 47.2% 47.2% 47.2% 47.2% 47.2% 47.2% Table 3 Footnote Table 3 footnote *Provided by the Minister of Finance.

#### 4.2.1. Labour Force

The labour force affects most of Part I benefits directly by increasing/decreasing the number of potential claimants. The labour force population is expected to increase from 20.4 million in 2021 to 20.7 million in 2022. The average labour force population between 2023 and 2029 is 21.3 million. This assumption is provided by the Minister of Finance.

#### 4.2.2. Unemployment Rate

The unemployment rate affects regular EI benefits directly by also increasing/decreasing the number of potential claimants. The average unemployment rate was 7.4% in 2021 and is expected to decrease to 5.4% in 2022. The unemployment rate is then expected to increase over the following years to reach an ultimate value of 5.7% in 2024. This assumption is provided by the Minister of Finance.

#### 4.2.3. Average Weekly Earnings

The growth in average weekly earnings on a calendar year basis is used, in conjunction with the increase in the MIE, to project the average weekly benefits. The expected growth in average weekly earnings is 5.6% in 2022 and it decreases to 3.8% in 2023. The average annual growth for years 2024 to 2029 is 2.9%. This assumption is provided by the Minister of Finance.

#### 4.2.4. Average Weekly Benefits

The average weekly benefits growth affects EI expenditures directly through a corresponding increase/decrease in Part I expenditures. The average weekly benefits are equal to the benefit payments divided by the number of benefit weeks paid for Part I benefits.

The annual average weekly benefits growth rates are forecasted at 9.0% for 2022 and 3.9% for 2023. The average annual increase for years 2024 to 2029 is 3.2%. The growth rates are generally the same for all benefit types but were impacted differently by the COVID-19 pandemic. As such, the assumed average weekly benefit growths for 2022 and 2023 for regular, maternity and parental, sickness, caregiving benefits and fishing benefits were adjusted to reflect each benefits’ individual growth rate.

#### 4.2.5. Potential Claimants

The EI Program is designed to provide temporary income support to eligible insured persons who have lost their jobs through no fault of their own, such as due to a shortage of work, or as a result of seasonal or mass lay-offs and are available for work. The potential claimants represent the number of individuals or the percentage of unemployed individuals that meet the basic coverage criteria of the EI program. The number of potential claimants as a percentage of unemployed decreased from 70.8% in 2020 to 63.4% in 2021. Based on the experience of the first six months of 2022, it is expected to decrease further to 49.8% in 2022. Afterwards, it is expected to gradually increase to 56.0% between 2023 and 2025, before decreasing over subsequent years to reach an ultimate value of 55.0% in 2027. Appendix D presents additional information on the potential claimants’ calculation.

#### 4.2.6. Recipiency Rate

The recipiency rate represents the proportion of potential claimants in a given period who are receiving EI regular benefits. It is directly linked to the target population of the EI program (i.e., potential claimants) and does not consider individuals outside the target population of the EI program, such as the long-term unemployed and those who did not contribute to the program in the previous year. The recipiency rate is normally lower than 100% for multiple reasons, including that some potential claimants have not accumulated the required number of insurable hours, while other potential claimants do not apply for benefits, are serving the one-week waiting period, or have exhausted the number of weeks they were entitled to receive and remain unemployed.

The recipiency rate without emergency or temporary measures was estimated to be 43.5% in 2020 and 95.3% in 2021. People having benefited from measures are not considered in the recipiency rate since they were accounted for separately as recipients of these measures. Based on the experience of the first six months of 2022, the recipiency rate is assumed to decrease to 87.5% for the whole year 2022. From 2023 onwards, the recipiency rate is set at 75.0%.

#### 4.2.7. Number of Weeks

EI expenditures are reported in the EI Operating Account on an accrual basis, that is, they are recorded in the period for which they should have been paid, regardless of the delay in processing the payment. Furthermore, EI benefits are paid on a weekly basis, but only weekdays that belong to a particular period are reported in that period.

The number of weeks affects Part I expenditures as benefits are payable for every weekday of the year, regardless of holidays. The number of workdays in a year ranges from 260 days to 262 days. Therefore, an adjustment is included to reflect the number of days benefits are paid in any year. The number of weeks for years 2021 to 2029 ranges between 52.0 and 52.4.

#### 4.2.8. Percentage of Benefit Weeks for Claimants with Earnings above MIE

From analyses of administrative data provided by ESDC, 37.9% of benefit weeks for claims that accrued in 2021 were based on insurable earnings above the MIE compared to 41.8% in 2020. Based on partial data for 2022, the proportion of benefit weeks for claimants with insurable earnings above the MIE is assumed to increase to 44.3% in 2022. The lower percentage of claims above the MIE from 2020 to 2022 (compared to an average of 47.2% for 2017 to 2019) is mostly due to the COVID-19 pandemic that caused greater unemployment for lower income Canadians. As the economy recovers, the share of claimants with earnings above the MIE is expected to increase again and reach an ultimate value of 47.2% in 2023.

#### 4.2.9. Other Expenditures

Additional information used to project expenditures such as pilot projects and temporary measures, the cost of new program changes, administration costs and employment benefits and support measures (EI Part II benefits) are provided by ESDC.

## 5. Results

### 5.1. Overview

This report provides actuarial forecasts and estimates for the purposes of sections 4, 66 and 69 of the EI Act. It has been prepared based on EI provisions as of 22 July 2022, on the information provided by the Ministers of ESD and Finance, and on the methodology and non-prescribed assumptions developed by the Actuary.

The key findings are as follows:

• The 2023 MIE is equal to \$61,500, an increase of 2.0% from the 2022 MIE of \$60,300.
• The 2023 EI 7-year forecast break-even rate is 1.74% of insurable earnings for residents of all provinces except Québec. The 2022 EI 7-year forecast break-even rate was 1.81% in the previous actuarial report. The decrease between the rate of 1.81% and 1.74% is mainly attributable to revisions to the cost of the temporary measures as well as to reductions in projected regular benefits due to lower expected unemployment rates.
• The 2023 premium reduction for residents of Québec due to its provincial plan is 0.36%.
• The 2023 premium reduction for employers who sponsor qualified wage-loss plans is estimated at \$1,345 million. This translates in premium reductions for employers who sponsor a qualified wage-loss plan corresponding to about 0.25%, 0.39%, 0.39% and 0.42% of insurable earnings for categories 1 through 4 respectivelyFootnote 7.
• The total earnings base is expected to grow each year from \$1,677 billion in 2021 to \$2,310 billion in 2029.
• Total expenditures are expected to decrease from \$48 billion in 2021 to \$27 billion in 2022 and to \$26 billion in 2023 due to the temporary measures being gradually phased out. Total annual expenditures are then expected to increase from \$28 billion in 2024 to \$32 billion in 2029.
• The EI Operating Account shows a cumulative deficit of \$25.9 billion as of 31 December 2021. The projected cumulative deficit as of 31 December 2022 is \$27.3 billion.

The Government announced, as part of Budget 2022, that the two-year EI premium freeze at the 2020 premium rate level will end in 2023. Moreover, the EI premium rate is limited to an annual increase or decrease of 0.05%, as per the EI Act.Consequently, the 2023 premium rate would be equal to:

• 1.63%Footnote 2 of insurable earnings for residents of all provinces except Québec; and
• 1.27% of insurable earnings for residents of Québec, after taking into account the QPIP reduction of 0.36%.

### 5.2. Earnings Base

EI premiums, prior to any adjustment for wage-loss plans, are determined by the product of the premium rate and the earnings base. The national earnings base is required to determine the 7‑year forecast break-even rate while the earnings base of provinces not offering a provincial plan is required to determine the reduction due to those plans. Since Québec is the only province offering a provincial plan, the earnings base is split between Québec and out-of-Québec residents.

Based on the methodology and assumptions presented in Section 4, Table 4 shows the earnings base for Québec and out-of-Québec residents as well as the total number of earners.

Table 4 Earnings Base and Number of Earners
Calendar YearEarnings Base
Out-of-Québec
(\$ million)
Earnings Base
Québec
(\$ million)
Earnings Base
Total
(\$ million)
Number of Earners
(thousands)
20201,186,229349,7991,536,02919,600
20211,291,565385,0971,676,66220,713
20221,409,189419,6891,828,87721,101
20231,451,913431,9201,883,83321,195
20241,520,215451,7251,971,94021,241
20251,575,406467,3262,042,73321,310
20261,623,735481,1132,104,84821,352
20271,670,739494,4752,165,21421,359
20281,725,804509,9002,235,70421,436
20291,783,932526,4722,310,40421,555

These results are used in the calculation of the 2023 EI 7-year forecast break‑even rate and the 2023 QPIP reduction. A detailed explanation of the methodology and assumptions used to derive the results is available in Appendix D.

### 5.3. Expenditures

This section examines the expenditures side of the 7-year forecast break-even rate. EI expenditures include Part I (income benefits), Part II (Employment Benefits and Support Measures (EBSM)), administration costs, benefit repayments and bad debts. EI benefits may also include temporary spending initiatives, such as pilot projects and special measures announced by the Government of Canada. A detailed explanation of the methodology and assumptions used to derive the results is available in Appendix D.

For the purposes of the 7-year forecast break-even rate calculation, penalties and interest on overdue accounts receivable are included on the expenditures side of the equation.

Table 5 shows the breakdown of the 2021 EI expenditures, as well as a projection up to 2029.

Table 5 Expenditures (\$ million)
202143,7512,4902,525(428)43(7)(17)48,355
202222,7732,5522,575(380)58(73)(12)27,492
202321,7902,1072,186(337)78(70)(15)25,738
202423,9432,1071,942(370)83(77)(16)27,613
202525,0842,1071,899(391)87(80)(16)28,691
202625,8382,1071,893(402)90(83)(16)29,426
202726,7062,1071,892(416)93(86)(17)30,278
202827,5102,1071,892(428)96(88)(17)31,070
202928,5832,1071,892(445)99(92)(18)32,126

Table 5 Footnote

Table 5 footnote *

Includes temporary measures between 2020 and 2023 aimed at reducing the impact of the COVID-19 pandemic.

Table 6 shows the breakdown of Part I EI expenditures.

Table 6 Part I Expenditures (\$ million)
Calendar YearRegularFishingWork-SharingTraining BenefitTable 6 footnote *Special Benefits - MPSpecial Benefits - SicknessTable 6 footnote **Special Benefits - CompassionateSpecial Benefits - Family Caregiver BenefitSpecial Benefits - Sub‑TotalTotal
202135,283368115-nil5,0572,737601307,98543,751
202215,00939253-nil5,1212,042501077,31922,773
202313,12239927225,1632,887601108,22021,790
202414,408421162855,4063,228641168,81323,943
202515,215433172945,5853,355661209,12525,084
202615,643445172965,7613,483681239,43625,838
202716,186458182965,9373,614701279,74726,706
202816,656469192966,1173,7497213110,06927,510
202917,303484192966,3563,9147513610,48128,583

Table 6 Footnotes

Table 6 footnote *

In Budget 2019, the Government of Canada announced a new EI Training Support Benefit. It is expected to be launched in 2023.

Table 6 footnote **

The estimated cost of the extension of the maximum number of weeks from 15 to 26 for EI Sickness benefits is included in the projection. This change is expected to be implemented towards the end of 2022.

### 5.4. Premium Reductions and Rebate

The employer premiums can be reduced through a lower employer multiplier when its employees are covered under a qualified wage-loss plan that reduces EI special benefits otherwise payable, provided that at least 5/12 of the reduction is passed on to employees. Premiums paid by employees and their employers can also be reduced when employees are covered under a plan established under provincial law that reduces EI maternity and parental benefits otherwise payable. An agreement must be in place between the Government of Canada and the province to establish a system for reducing premiums paid by residents of that province and their employers.

Budget 2019 announced an EI Small Business Premium Rebate to offset the upward pressure on EI premiums resulting from the EI Training Support Benefit (originally expected to be launched in late 2020, but now postponed to 2023). This rebate is proposed to be available to any business that pays employer EI premiums equal to or less than \$20,000 for the 2023 calendar year. Using forecasted calendar year expenditures received from the Minister of ESD, the cost of the EI Training Support Benefit in 2023 (including the administration costs related to this benefit) is expected to represent 2 cents (1.51 cents unrounded, or 0.0151%). This cost is included in the 7‑year forecast break-even rate of 1.74%. The details of the rebate were not confirmed at the time the report was produced and will still need to be approved through legislation.

Table 7 shows the projection of the expected premium reductions and rebate up to 2029 taken into account in the determination of the 7-year forecast break-even rate. Temporary and permanent measures recently announced are considered in the projection of the premium reductions for qualified wage-loss plans and provincial plans.

Table 7 Premium Reductions and Rebate (\$ million)
Calendar YearQualified Wage-Loss PlansProvincial PlansSBPRTable 7 footnote *
20231,3451,55526
20241,3701,62627
20251,5881,68228
20261,6971,73229
20271,9411,78029
20282,0491,83629
20292,1311,89529

Table 7 Footnote

Table 7 footnote *

Small Business Premium Rebate; the details of the rebate were not confirmed at the time the report was produced and will still need to be approved through legislation. The projected amounts of the rebate were provided by the Minister of ESD.

### 5.5. 7-Year Forecast Break-Even Rate

The 7-year forecast break-even rate is the rate that, based on relevant assumptions, is expected to generate sufficient premium revenue during the next seven years to ensure that, at the end of that seven-year period, the amounts credited and charged to the EI Operating Account (EIOA) after 31 December 2008 are equal.

This rate is expected to generate sufficient premium revenue during the 2023-2029 period to pay for the expected EI expenditures over that same period and to eliminate the projected deficit that has accumulated in the EI Operating Account as of 31 December 2022.

The expected amounts of the premium reductions over the next seven years for qualified wage‑loss plans (WLP) and for provincial plans (PP), as well as the Small Business Premium Rebate related to the EI Training Support Benefit expected to launch in 2023 are included in the EI expenditures for purposes of determining the 7-year forecast break-even rate. This ensures that in the absence of wage-loss plans, provincial plans and Small Business Premium Rebate, a premium rate set at the 7-year forecast break-even rate would generate enough revenues to cover all EI expenses for employees of every employer residing in any province.

Table 8 shows the projection of the variables used to determine the 7-year forecast break-even rate. The annual expected pay-as-you-go rates (PayGo) are the rates required to cover the expected expenditures of that year. The 7-year forecast break-even rate is higher than the average PayGo rates since the projected deficit as at 31 December 2022 is considered.

Table 8 Calculation of the 7-Year Forecast Break-Even Rate (\$ million)
Calendar YearExpenditures Covered by the 7-Year Forecast Break-Even RateSurplus (Deficit) in the EIOA as at 31 December 2022Earnings BaseAnnual PayGo Rate / 7-Year Forecast Break- Even Rate (%)
EI ExpendituresReduction for WLPReduction for PPSBPRTable 8 footnote *Total Expenditures Before Reductions and Rebate
202325,7381,3451,5552628,665N/A1,883,8331.52%
202427,6131,3701,6262730,637N/A1,971,9401.55%
202528,6911,5881,6822831,989N/A2,042,7331.57%
202629,4261,6971,7322932,884N/A2,104,8481.56%
202730,2781,9411,7802934,029N/A2,165,2141.57%
202831,0702,0491,8362934,984N/A2,235,7041.56%
202932,1262,1311,8952936,182N/A2,310,4041.57%
2023-29 204,943 12,122 12,107 198 229,369 (27,255) 14,714,675 1.74%Table 8 footnote **

Table 8 Footnotes

Table 8 footnote *

Small Business Premium Rebate (related to the EI Training Support Benefit announced in Budget 2019 and proposed to be launched in 2023).

Table 8 footnote **

The deficit in the EIOA as at 31 December 2022 is used in the calculation of the 7-year forecast break-even rate: (229,369 + 27,255) / 14,714,675 = 1.74%.

Table 9 shows the projection of revenues, EI expenditures, and the account balance using the 7‑year forecast break-even rate and the premium reductions.

Table 9 Projection of the EI Operating Account using the 7-year forecast break-even rate (\$ million)
Gross Premiums after RefundsReduction for WLPReduction for Provincial PlansSBPRTable 9 footnote *Other Adj.Table 9 footnote **
20211.58%26,491(1,135)(1,540)-nil(71)23,74448,355(24,611)(25,865)
20221.58%28,896(1,209)(1,595)-nil1026,10227,492(1,390)(27,255)
20231.74%32,779(1,345)(1,555)(26)-nil29,85225,7384,114(23,141)
20241.74%34,312(1,370)(1,626)(27)-nil31,28827,6133,675(19,466)
20251.74%35,544(1,588)(1,682)(28)-nil32,24528,6913,554(15,912)
20261.74%36,624(1,697)(1,732)(29)-nil33,16729,4263,740(12,171)
20271.74%37,675(1,941)(1,780)(29)-nil33,92430,2783,646(8,525)
20281.74%38,901(2,049)(1,836)(29)-nil34,98831,0703,918(4,608)
20291.74%40,201(2,131)(1,895)(29)-nil36,14532,1264,019(589)

Table 9 Footnotes

Table 9 footnote *

Table 9 footnote **

The 2023 EI 7-year forecast break‑even rate is 1.74%. This rate would balance out the EI Operating Account at the end of 2029. The cumulative balance in the EI Operating Account at the end of 2029 is not exactly \$0 since the 7-year forecast break-even rate is rounded to the nearest cent.

The Government announced, as part of Budget 2022, that the two-year EI premium freeze at the 2020 premium rate level will end in 2023. Moreover, the EI premium rate is limited to an annual increase or decrease of 0.05%, as per the EI Act.

Consequently, the premium rate applicable to residents of all provinces except Québec for 2023 would be 1.63%Footnote 2. The premium rate applicable to residents of Québec would be 1.27% (1.63% minus 0.36%).

Table 10 shows the projection of revenues and the corresponding account balances for 2022 and 2023 based on a premium rate of 1.58% for 2021 and 2022 and on a premium rate of 1.63% for 2023. Expenditures and premium reductions are the same as the ones shown in Table 9. For years after 2023, a premium rate would be recalculated each year based on the 7-year forecast break-even rate methodology considering the existing economic environment and revised assumptions at that time. The expected deficit at the end of calendar year 2023 corresponds to \$25 billion.

Table 10 Projection of the EI Operating Account using a Premium Rate of 1.63% in 2023 (\$ million)
Gross Premiums after RefundsReduction for WLPReduction for Provincial PlansSBPRTable 10 footnote *Other Adj.Table 10 footnote **
20211.58%26,491(1,135)(1,540)-nil(71)23,74448,355(24,611)(25,865)
20221.58%28,896(1,209)(1,595)-nil1026,10227,492(1,390)(27,255)
20231.63%30,706(1,345)(1,555)(26)-nil27,78025,7382,042(25,213)

Table 10 Footnotes

Table 10 footnote *

Table 10 footnote **

### 5.7. Québec Parental Insurance Plan (QPIP) Reduction for 2023

EI maternity and parental (MP) benefits included in Part I special benefits, as well as direct EI administrative costs incurred to provide MP benefits (variable administrative costs (VAC)), are required to determine the QPIP reduction. VAC represent the direct operating costs incurred by the EI program associated with the administration of EI MP benefits outside Québec. They are determined each year by ESDC in accordance with the agreement between Canada and Québec, which stipulates a minimum VAC amount.

EI MP benefits are projected from the base year 2021 but adjusted to align with the expected experience as if projected from actual benefits paid in 2019 and reflect the impacts of program changes and special measures. The projected EI MP expenditures used to determine the 2023 QPIP reduction are shown in Table 11. They include the cost estimates provided by ESDC for temporary measures.

Actual Forecast Forecast 2021 2022 2023 5,057 5,121 5,163 24 24 24 5,081 5,145 5,187

The QPIP reduction is equal to the ratio of EI MP expenditures (EI MP benefits and VAC) to the earnings base of residents of all provinces without a provincial plan, that is, residents of all provinces except Québec. It is the premium reduction for Québec residents as it relates to the savings to the EI Program resulting from the QPIP.

Table 12 shows the estimates of the variables that are required in the calculation of the 2023 QPIP reduction, as well as the resulting 2023 QPIP reduction.

2023 Forecast 5,187 1,451,913 0.3573% 0.36%

### 5.8. Qualified Wage-Loss Plan Reductions for 2023

Based on the methodology developed in Appendix B and on the 2023 projected insurable earnings of employees covered by a qualified wage-loss plan, the 2023 estimated reduction in employer premiums due to qualified wage-loss plans is \$1,345 million, compared to \$1,209 million for 2022.

EI premiums paid by the employer are equal to the employer multiplier times the premiums deducted by the employer on behalf of its employees. Generally, the employer multiplier is equal to 1.4. However, the employer premiums can be reduced through a lower employer multiplier when its employees are covered under one of four types of qualified wage-loss plans.

Table 13 shows the main results. A detailed explanation of the data and methodology used to derive the results is available in Appendix E.

Table 13 Reduction in Employer Premiums Due to Qualified Wage-Loss Plans
Wage-Loss Plan CategoryUnrounded Rate of ReductionRounded Rate of ReductionEmployer Multiplier (Out-of-Québec)Table 13 footnote *Employer Multiplier (Québec)Table 13 footnote *2023 Estimated Insurable Earnings (\$ million)2023 Estimated Premium Reduction (\$ million)
Category 10.2458%0.25%1.2491.20664,102158
Category 20.3913%0.39%1.1601.09230,127118
Category 30.3866%0.39%1.1631.096242,634938
Category 40.4238%0.42%1.1401.06631,058132
TotalN/AN/AN/AN/A367,9211,345

Table 13 Footnotes

Table 13 footnote *

The Employer Multipliers shown are based on a 2023 premium rate of 1.63% (1.27% for Quebec residents).

## 6. Uncertainty of Results

The 7-year forecast break-even rate and the subsequent impact on the EI Operating Account (EIOA) depends on different demographic and economic factors. As actual experience over the next seven years will likely deviate from the assumptions presented throughout this report, this section presents individual tests and alternative scenarios for illustration purposes.

### 6.1. Individual Tests

The individual tests illustrate the sensitivity of the 7-year forecast break-even rate to changes in the unemployment rate and the recipiency rate assumptions. Afterwards, the effect of a variation in the premium rate on the EIOA is examined.

#### 6.1.1. Unemployment Rate

The unemployment rate is closely related to the state of the economy and the supply of labour. The following table shows that a variation in the average unemployment rate of 0.5% over the period 2023-2029 would result in an increase/decrease of about 0.07% in the 2023 EI 7‑year forecast break-even rate (assuming all other assumptions remain constant).

Table 14 Sensitivity of the 7-Year Forecast Break-Even Rate to the Unemployment Rate (UR)
Variation in Average UR (2023-2029)Average UR (2023-2029)Resulting 7-Year Forecast Break-Even Rate
(1.0%)4.7%1.61%
(0.5%)5.2%1.67%
Base 5.7% 1.74%
0.5%6.2%1.81%
1.0%6.7%1.88%

#### 6.1.2. Recipiency Rate

The volatility shown by the recipiency rate in the past can be attributed to several factors, such as the decision of those eligible for EI to apply (or not) for the benefit. The following table shows that a variation in the average recipiency rate of 5% over the period 2023-2029 would result in an increase/decrease between 0.04% and 0.05% in the 2023 EI 7-year forecast break-even rate (assuming all other assumptions remain constant).

Table 15 Sensitivity of the 7-Year Forecast Break-Even Rate to the Recipiency Rate (RR)
Variation in Average RR (2023-2029)Average RR (2023-2029)Resulting 7-Year Forecast Break-Even Rate
(10.0%)65.0%1.65%
(5.0%)70.0%1.70%
Base 75.0% 1.74%
5.0%80.0%1.79%
10.0%85.0%1.84%

As shown in the following table, a variation in the premium rate of one‑hundredth percentage point (0.01% of insurable earnings) from the 7-year forecast break-even rate would result in a \$1,471 million increase/decrease in the cumulative balance of the EIOA at the end of the 7‑year forecast period.

Table 16 Sensitivity of the EIOA Balance to the 7-Year Forecast Break-Even Rate
Variation in EI 7-Year Forecast Break-Even RateResulting EI 7-Year Forecast Break-Even RateCumulative EIOA Balance as at 31 Dec. 2029 (\$ million)Variation in EIOA Cumulative Balance as at 31 Dec. 2029 (\$ million)
(0.05%)1.69%(7,946)(7,357)
(0.01%)1.73%(2,060)(1,471)
Base 1.74% (589) -nil
0.01%1.75%8831,471
0.05%1.79%6,7697,357

### 6.2. Scenarios

The uncertainties related to the evolution of the COVID-19 pandemic as well as the geopolitical situation, for example, conflict in Ukraine, may affect the Canadian economy. The situation remains fluid and will likely continue to evolve for some time. The future impacts on the assumptions used to determine the EI 7-year forecast break-even rate are uncertain. This uncertainty is highlighted through the development of alternative scenarios by changing a small number of assumptions. This exercise is not meant to create probable scenarios, but rather to demonstrate some possible impacts from different economic environments relative to the base scenario. Therefore, these scenarios might not be considered as internally consistent and are presented strictly for illustration purposes.

This section shows the impact on the 7-year forecast break-even rate of a combination of changes to various assumptions. For comparison purposes, Table 17 below presents the key assumptions that vary in the low-cost, high-cost and short-term shock scenarios.

Table 17 Assumptions for Base Scenario
Calendar YearLabour Force IncreaseUnemployment RateIncrease in Average Employment IncomeRecipiency Rate
20230.9%5.6%3.4%75.0%
20240.7%5.7%2.7%75.0%
20250.6%5.7%2.9%75.0%
20260.6%5.7%2.9%75.0%
20270.4%5.7%2.8%75.0%
20280.7%5.7%2.8%75.0%
20290.8%5.7%2.8%75.0%

#### 6.2.1. Low-Cost Scenario

Under this scenario, each of the assumptions shown in Table 17 is changed to create downward pressure on the 7-year forecast break-even rate.

Table 18 Alternate Assumptions for the Low-Cost Scenario
Calendar YearLabour Force IncreaseUnemployment RateIncrease in Average Employment IncomeRecipiency Rate
20238.7%4.1%3.9%72.0%
20240.7%4.2%3.2%72.0%
20250.7%4.2%3.4%72.0%
20260.6%4.2%3.4%72.0%
20270.5%4.2%3.3%72.0%
20280.7%4.2%3.3%72.0%
20290.8%4.2%3.3%72.0%

The results of this scenario on the 2023 7-year forecast break-even rate are illustrated in Table 19. The 7-year forecast break-even rate calculated for 2023 would decrease from 1.74% in the base scenario to 1.47%.

Table 19 Impact of the Low-Cost Scenario on the 7-Year Forecast Break-Even Rate (\$ billion)
Calendar Year7-Year Break-Even Rate (%)Net PremiumsExpendituresAnnual Surplus / Deficit on EIOACumulative Surplus / Deficit on EIOA (31 Dec.)
2022N/AN/AN/AN/A(27.3)
20231.47%27.223.43.8(23.5)
20241.47%28.625.13.5(20.0)
20251.47%29.626.13.5(16.4)
20261.47%30.726.93.7(12.7)
20271.47%31.527.83.6(9.0)
20281.47%32.628.74.0(5.1)
20291.47%33.929.84.1(0.9)

#### 6.2.2. High-Cost Scenario

Under this scenario, each of the assumptions shown in Table 17 are changed to create upward pressure on the 7-year forecast break-even rate.

Table 20 Alternate Assumptions for the High-Cost Scenario
Calendar YearLabour Force IncreaseUnemployment RateIncrease in Average Employment IncomeRecipiency Rate
2023(6.8%)7.1%2.9%78.0%
20240.6%7.2%2.2%78.0%
20250.6%7.2%2.4%78.0%
20260.5%7.2%2.4%78.0%
20270.4%7.2%2.3%78.0%
20280.6%7.2%2.3%78.0%
20290.8%7.2%2.3%78.0%

The results of this scenario on the 2023 7-year forecast break-even rate are illustrated in Table 21. The 7-year forecast break-even rate calculated for 2023 would increase from 1.74% in the base scenario to 2.04% in this scenario.

Table 21 Impact of the High-Cost Scenario on the 7-Year Forecast Break-Even Rate (\$ billion)
Calendar Year7-Year Break-Even Rate (%)Net PremiumsExpendituresAnnual Surplus / Deficit on EIOACumulative Surplus / Deficit on EIOA (31 Dec.)
2022N/AN/AN/AN/A(27.3)
20232.04%32.227.84.4(22.8)
20242.04%33.629.83.8(19.1)
20252.04%34.430.93.5(15.5)
20262.04%35.231.53.7(11.8)
20272.04%35.932.33.6(8.2)
20282.04%36.833.03.8(4.3)
20292.04%37.834.03.9(0.5)

#### 6.2.3. Short-Term Shock Scenario

Under this scenario, each of the assumptions shown in Table 17 are changed to create significant pressure over a short-term period on the 2023 7-year forecast break-even rate. These alternative assumptions have the same variations, on average over the 7-year projection period, as the assumptions presented in the high-cost scenario above. The difference between both scenarios is the amplitude of the variations over the short-term. As shown in Table 22, the alternative assumptions are assumed to gradually return to the base scenario.

Table 22 Alternate Assumptions for Shock Scenario
Calendar YearLabour Force IncreaseUnemployment RateIncrease in Average Employment IncomeRecipiency Rate
2023(6.8%)9.5%1.9%80.0%
20240.6%8.5%1.7%80.0%
20250.6%7.5%2.4%79.0%
20260.5%7.0%2.4%78.0%
20270.4%6.5%2.8%77.0%
20280.6%6.0%2.8%76.0%
20290.8%5.7%2.8%75.0%

The results of this scenario on the 2023 7-year forecast break-even rate are illustrated in Table 23. The 7-year forecast break-even rate calculated for 2023 would increase from 1.74% in the base scenario to 2.04% in this scenario.

Table 23 Impact of the Shock Scenario on the 7-Year Forecast Break-Even Rate (\$ billion)
Calendar Year7-Year Break-Even Rate (%)Net PremiumsExpendituresAnnual Surplus / Deficit on EIOACumulative Surplus / Deficit on EIOA (31 Dec.)
2022N/AN/AN/AN/A(27.3)
20232.04%31.233.3(2.0)(29.3)
20242.04%32.833.1(0.3)(29.6)
20252.04%34.031.72.3(27.4)
20262.04%35.030.94.1(23.3)
20272.04%36.030.16.0(17.3)
20282.04%37.329.48.0(9.3)
20292.04%38.729.49.30.0

## 7. Reconciliation of Changes in the 7-Year Forecast Break Even Rate

The main elements of change in the 7-year forecast break-even rate since the 2022 Actuarial Report are presented in Table 24.

7-Year Forecast Break-Even Rate (%) 1.81 1.8109 0.0186 (0.0261) (0.0070) 0.0048 (0.0504) (0.0075) 1.7433 1.74

The actual 2021 expenditures were higher than projected in the 2022 Actuarial Report. This resulted in an increase in the cumulative deficit of the EI Operating Account, i.e., \$25,865 million compared to the projected deficit of \$23,231 million. This increased the 7-year forecast break-even rate by almost 2 cents.

As shown in the sensitivity test section, the unemployment rate assumption has a significant impact on the 7-year forecast break-even rate. In comparison with the 2022 Actuarial Report, the unemployment rate assumption was revised downward, from 5.8% to 5.6% on average for the 2022-2028 period. This decreased the 7-year forecast break-even rate by almost 3 cents.

The higher projected earnings base, driven by an expected increase in number of earners but slightly offset by lower projected average insurable earnings than estimated in the 2022 Actuarial Report, decreased the 7-year forecast break-even rate. This decrease in the rate is partially offset by an increase in projected expenditures.

Additionally, revisions to the expenditures estimates for program changes (i.e., Pilot Projects/Special Temporary Measures and Permanent Measures) decreased the 7-year forecast break-even rate by almost 5 cents.

Overall, the 7-year forecast break‑even rate decreased from 1.81% in 2022 to 1.74% in 2023.

## 8. Conclusion

This report was prepared by the Actuary in accordance with the relevant legislation and provides to the Commission the forecasts and estimates for the purposes of sections 4 (MIE), 66 (EI premium rate) and 69 (employers who sponsor qualified wage-loss plans and premium reductions for Québec residents and their employers) of the EI Act.

In accordance with the methodology detailed in the EI Act and the relevant economic data, the 2023 MIE is \$61,500. In addition, the 2023 estimated employer premium reduction due to qualified wage-loss plans is \$1,345 million, and the 2023 QPIP reduction is 0.36%.

Based on the assumptions of the relevant economic and demographic variables provided by the Minister of Finance, on the expenditure estimates provided by the Minister of ESD, and on the methodology and other assumptions developed by the Actuary, the 7-year forecast break-even rate that would generate sufficient premium revenue to cover the expected cost of the EI program for the period 2023-2029 and eliminate the projected \$27.3 billion cumulative deficit in the EI Operating Account as of 31 December 2022, is 1.74% of insurable earnings.

A reconciliation of the 7-year forecast break-even rate, from 1.81% in the 2022 Actuarial Report to 1.74% in the current report, is shown in Section 7. The decrease between the rate of 1.81% and 1.74% is mainly attributable to revisions to the cost estimates of the temporary measures as well as to reductions in projected regular benefits due to lower expected unemployment rates.

• The Government announced, as part of Budget 2022, that the two-year EI premium freeze at the 2020 premium rate level will end in 2023. Moreover, the EI premium rate is limited to an annual increase or decrease of 0.05%, as per the EI Act.Consequently, the 2023 premium rate would be equal to:
• 1.63%Footnote 2 of insurable earnings for residents of all provinces except Québec; and
• 1.27% of insurable earnings for residents of Québec, after taking into account the QPIP reduction of 0.36%.

## 9. Actuarial Opinion

In our opinion, considering that this report was prepared pursuant to the Employment Insurance Act:

• the data on which this report is based are sufficient and reliable for the purposes of this report;
• the assumptions are appropriate for the purposes of this report; and
• the methods employed are appropriate for the purposes of this report.

Based on the results of this valuation, we hereby certify that the 7-year forecast break-even rate required to generate sufficient premium revenue to cover the expected cost of the EI program over the period 2023-2029 and eliminate the projected cumulative deficit in the EI Operating Account as of 31 December 2022, is 1.74% of insurable earnings.

This report has been prepared, and our opinions given, in accordance with accepted actuarial practice in Canada.

The estimates presented in this report are based on prescribed information provided by the Minister of Employment and Social Development and the Minister of Finance.

As of the date of the signing of this report, we have not learned of any subsequent events that would have a material impact on the 2023 7-year forecast break-even rate presented in this report.

Mathieu Desy, FCIA, FSA
Senior Actuary, Employment Insurance Premium Rate-Setting

Marie-Pier Bernier, FCIA, FSA

Thierry Truong, FCIA, FSA

22 August 2022

## Appendix A - Summary of EI Legislation

The Unemployment Insurance program was first implemented in 1940, with the last major reform occurring in 1996. At that time, the name of the program was changed from “Unemployment Insurance” to “Employment Insurance” to reflect the program’s primary objective of promoting employment in the labour force and to better emphasize that individuals’ access to the program is linked to significant workforce attachment.

The EI program provides temporary income support to individuals who have lost their employment through no fault of their own or are unable to work due to specific life circumstances. This Appendix provides a brief overview of the EI program.

Temporary measures, as well as future permanent changes not yet in effect are not shown in this Appendix; they are summarized in Section 2 and considered in the results presented in this report. It is important to note that the temporary measures currently in place take precedence over some of the normal program provisions described below. More specifically, measures to facilitate access to EI benefits are in place for claims established between 27 September 2020 and 24 September 2022 (see Section 2 and Appendix D for the most current measures).

### A.1. EI Part I Benefits

Although access and entitlement to benefits vary depending on each benefit type, the calculation of weekly benefit rates is the same for most benefit types. Weekly benefits are generally equal to 55% of the claimants’ average weekly insurable earnings, during their variable best weeks over the qualifying period (generally 52 weeks), up to a maximum amount. The number of best weeks taken into account is determined by the regional unemployment rate and varies from 14 to 22 insurable earnings weeks. The maximum amount payable is determined by the maximum insurable earnings (MIE).

The EI family supplement provides additional benefits to low-income families with children. The family supplement rate is based on the net family income up to a maximum of \$25,921 per year and the number of children in the family and their ages. The family supplement may increase benefits up to 80% of average weekly insurable earnings.

Benefits are not paid until claimants have served a waiting period of one week of unemployment.

To stay connected to the labour market and earn some additional income, EI claimants can work while they are on claim. This measure is available to those collecting regular, fishing, maternity, parental, sickness, compassionate care, or family caregiver benefits. Claimants can keep 50 cents of their EI benefits for every dollar they earn, up to a maximum of 90 per cent of the weekly insurable earnings used to calculate their EI benefit amount.

#### A.1.1. Regular Benefits

EI regular benefits are provided to eligible insured persons who have lost their jobs through no fault of their own (for example, due to a shortage of work, seasonal or mass lay-offs) and are available for and able to work but can’t find a job.

To qualify for regular benefits, individuals must have been without work and without pay for at least seven consecutive days. Claimants must have worked at least the minimum required hours of insurable employment, between 420 and 700 hours, as determined by the regional unemployment rate, in the last 52-week qualifying period or since their last claim, whichever is shorter. The number of insurable hours required to qualify is increased in cases of violations regarding prior EI claims. Claimants must also be available and actively looking for work in order to maintain eligibility.

The maximum number of regular benefit weeks varies from 14 to 45 weeks, depending on the number of insurable hours accumulated in the qualifying period and the regional unemployment rate. In certain circumstances, the maximum duration of benefits can be extended through temporary special measures.

#### A.1.2. Fishing Benefits

EI provides fishing benefits to qualifying self-employed fishers who are actively seeking work. Unlike regular EI benefits, eligibility for EI fishing benefits is determined by the claimant's insurable fishing earnings accumulated during the qualifying period, not the number of hours worked. A self‑employed person engaged in fishing who has earned a minimum of between \$2,500 and \$4,200 (depending on the regional unemployment rate) during the maximum 31‑week qualifying period is eligible to receive up to 26 weeks of EI fishing benefits.

#### A.1.3. Work-Sharing Benefits

To avoid lay-offs due to a temporary reduction in the normal level of business activity that is beyond the control of the employer, employers and employees can enter into a Work-Sharing agreement with the Canada Employment Insurance Commission (Commission) through Service Canada to provide EI benefits to eligible workers willing to work a temporarily reduced work week. This enables employers to retain staff and adjust their work activity during temporary work shortages, as well as avoid the expenses of hiring and training new staff once business levels return to normal. Employees are able to retain their skills and jobs while receiving EI benefits for the days that they do not work.

Work-Sharing agreements have a minimum duration of 6 weeks and a maximum of 26 weeks, with a possible extension of up to 12 weeks for a maximum duration of 38 weeks. From time to time, the maximum duration of Work-Sharing agreements may be extended through temporary special measures.

#### A.1.4. Special Benefits

To qualify for special benefits, the claimant's normal weekly earnings must be reduced by over 40%. In addition, special benefits require a minimum of 600 hours of insurable employment in the 52-week qualifying period. Special benefits include:

• Maternity benefits, for people who are away from work because they are pregnant or have recently given birth. These benefits can be paid for a maximum of 15 weeks. They can start as early as 12 weeks before the expected date of birth and can end as late as 17 weeks after the actual date of birth.
• Parental benefits, for a parent to take care of their newborn or newly adopted child. Parents may share the available weeks of parental benefits. There are two options available:
• Standard parental benefits can be paid for a maximum of 40 weeks at 55% of the claimant’s average weekly insurable earnings (up to a maximum) and must be claimed within a 52-week period (12 months) after the week the child was born or placed for the purpose of adoption. As no parent can access more than 35 weeks, sharing parental benefits is required to access the additional weeks.

• Extended parental benefits can be paid for a maximum of 69 weeks at 33% of the claimant’s average weekly insurable earnings (up to a maximum) and must be claimed within a 78-week period (18 months) after the week the child was born or placed for the purpose of adoption. As no parent can access more than 61 weeks, sharing parental benefits is required to access the additional weeks.

• Sickness benefits, for people who are unable to work due to illness, injury or quarantine. These benefits can be paid for a maximum of 15 weeks.
• Compassionate care benefits, for people who take a temporary leave from work to provide end-of-life care or support for a family member who has a significant risk of death in the next 6 months. These benefits can be paid for a maximum of 26 weeks, which can be shared among eligible family caregivers.
• Family Caregiver Benefit for Children, for family members who must be away from work to care for or support a critically ill or injured child. This benefit can be paid for a maximum of 35 weeks, which can be shared among eligible family caregivers.
• Family Caregiver Benefit for Adults, for family members who must be away from work to care for or support a critically ill or injured adult. This benefit can be paid for a maximum of 15 weeks, which can be shared among eligible family caregivers.

Since 2006, the Province of Québec has been responsible for providing maternity and parental benefits to residents of Québec through the Québec Parental Insurance Plan (QPIP). All other types of EI benefits remain available to residents of Québec.

Self-employed fishers can qualify for special benefits with fishing earnings of \$3,760 during the 31-week qualifying period.

Self-employed Canadians voluntarily enter into an agreement with the Commission through Service Canada to contribute EI premiums and access EI special benefits. They must be registered for at least one year prior to claiming benefits and their self-employment earnings must meet the minimum self-employment eligibility threshold in the year preceding the claim.

Self-employed residents of Québec entering into an agreement with the Commission cannot access EI maternity and parental benefits, as maternity and parental (including adoption) benefits are already payable through QPIP, but can access sickness, compassionate care, and family caregiver benefits.

### A.2. EI Part II Benefits

Part II of the EI Act includes Employment Benefits and Support Measures (EBSM), which are labour market programs and services established to help Canadians find and keep employment and to develop a labour force that meets the current and emerging needs of employers. These programs are delivered mostly by provincial and territorial governments through Labour Market Development Agreements (LMDAs).

### A.3. Financing

The EI program is financed by contributions from employees and employers, via premiums paid on insurable earnings up to the MIE. Employee premiums apply to insurable earnings, up to the MIE. However, the EI program has specific provisions for contributors who are unlikely to qualify for benefits, e.g., employees with insured earnings of less than \$2,000 are entitled to a refund of their EI premiums when they file an income tax return.

In addition, in accordance with subsection 69(2) of the EI Act and related regulations, a mechanism to reduce EI premiums paid by Québec residents and their employers was introduced. The reduced premium rate reflects the savings to the EI program due to the existence of the QPIP.

Since 31 January 2010, self-employed individuals may voluntarily opt into the EI program to receive EI special benefits. Self-employed individuals pay the same EI premium rate as salaried employees but are not required to pay the employer portion of premiums, as they do not have access to EI regular benefits.

Employers pay premiums at the rate of 1.4 times those of employees. Employers bear a higher overall share of program costs based on the principle that they have more control over layoffs. However, in accordance with subsection 69(1) of the EI Act, employers who sponsor a qualified wage-loss plan which reduces the EI special benefits otherwise payable receive a premium reduction if they meet the requirements set out by the Commission. In such cases, the employer pays premiums at a rate that is lower than 1.4 times those of employees, and a portion of those savings must be returned to their employees.

In accordance with subsection 66(1) of the EI Act, the Commission shall set the premium rate for each year in order to generate just enough premium revenue to ensure that, at the end of the seven-year period that commences at the beginning of that year, the total of the amounts credited to the EI Operating Account after 31 December 2008 is equal to the total of the amounts charged to that Account after that date. This calculated premium rate is referred to as the 7-year forecast break-even rate.

##### Legislative Framework

The EI Act includes the following dates by which various responsibilities related to the setting of the EI premium rate must be met.

###### 22 July

The Minister of Employment and Social Development (ESD) shall provide the information prescribed in subsection 66.1(1) of the EI Act.

The Minister of Finance shall provide the information prescribed in subsection 66.2(1) of the EI Act.

###### 22 August

In accordance with section 66.3 of the EI Act, the Actuary shall prepare actuarial forecasts and estimates for the purposes of sections 4, 66 and 69 of the EI Act, and shall provide the Commission with a report that sets out:

• the forecast premium rate for the following year and a detailed analysis in support of the forecast;
• the calculations performed under sections 4 and 69 of the EI Act;
• the information provided under section 66.1 of the EI Act; and
• the source of the data, the actuarial and economic assumptions and the actuarial methodology used.
###### 31 August

The Commission shall provide the Ministers of ESD and Finance with the report referred to in section 66.3 and a summary of that report.

###### 14 September

The Commission shall set the premium rate for the following year and make available to the public the report referred to in section 66.3 of the EI Act and a summary of that report. After the premium rate is set and the report and its summary are made available to the public, the Minister of ESD shall cause them to be laid before each House of Parliament on any of the next 10 days during which that House is sitting.

###### 30 September

The Governor in Council may set a premium rate that is different from the one set by the Commission, based on the joint recommendation of the Ministers of ESD and Finance, if it is considered to be in the public interest.

## Appendix B - Premium Calculation Methodology

Based on relevant assumptions and prior to any limit to the annual change in the premium rate, the 7-year forecast break-even rate for 2023 is the premium rate that is expected to generate sufficient premium revenue to ensure that at the end of 2029 the amounts credited and charged to the EI Operating Account after 31 December 2008 are equal. It is therefore based on the projected balance of the EI Operating Account as of 31 December 2022 and the projection over a period of seven years (2023-2029) of both the earnings base and EI expenditures.

The earnings base represents the total insurable earnings on which salaried employees and their employers pay EI premiums, and the earnings on which self‑employed individuals that opted into the EI program pay EI premiums. The employer portion of the earnings base for salaried employees is equal to 1.4 times the employee portion of the earnings base for salaried employees, prior to the adjustment to reflect employee premium refunds.

In accordance with section 69 of the EI Act and related regulations, premium reductions are granted to employers who sponsor a qualified wage-loss plan as well as to employees residing in a province that has established a provincial plan and their employers. The expected costs of these premium reductions over the next seven years are included in the EI expenditures for purposes of determining the 7-year forecast break-even rate. More information on these premium reductions as well as the methodology used for calculating the applicable reductions for 2023 are provided in subsections B.2 (wage-loss) and B.3 (provincial plan).

For purposes of determining the 7-year forecast break-even rate, the earnings base and EI expenditures are projected over a seven-year period using the expected growth rates in the relevant economic and demographic variables applied to the base year, i.e., the last year for which complete data are available. The base year for the earnings base is 2020, which is the most recent year for which fully assessed T4 data are available. However, for certain assumptions, the 2021 partially assessed information is used. Complete data for 2021 will not become available until January 2023. EI benefits are projected from actual 2021 benefits paid (base year) but adjusted based on the first six months of known data for 2022 and realigned in year 2023 to the expected experience as if projected from actual benefits paid in 2019Footnote 3.

The earnings base and EI expenditures are projected from the base year using:

• Data and assumptions provided by the Minister of ESD, including prescribed information as set out in section 66.1 of the EI Act;
• Assumptions and forecasts provided by the Minister of Finance in accordance with section 66.2 of the EI Act;
• Methodology and other assumptions developed by the Actuary.

The 7-year forecast break-even rate is calculated such that the sum of expected revenues from insurable and self-employed covered earnings over the next seven years and the EI Operating Account balance as of 31 December 2022 are equal to the expected EI expenditures over the same period. For this purpose, the expected EI expenditures include the expected amount of premium reductions granted to employers who sponsor a qualified wage-loss plan as well as to employees residing in a province that has established a provincial plan and their employers.

The expected EI expenditures are comprised of:

• Direct program expenditures, including:
• EI Part I benefits, net of benefit repayments that apply in certain situations (e.g., if a claimant’s income for a tax year exceeds 1.25 times the annual MIE, the claimant may be required to repay a portion of benefits received);
• EI Part II benefits, that is, employment benefits and support measures;
• Additional benefits paid through various pilot projects and special measures;
• Other costs such as bad debt expense, net of penalties and interests recovered from claimants.
• Premium reductions granted to employees residing in a province that has established a provincial plan and to their employers; and
• Premium rebate granted to small businesses related to the new EI Training Support Benefit expected to be launched in calendar year 2023. The details of the rebate still need to be confirmed through legislation.

The expected revenues are comprised of:

• Employer premiums paid on behalf of salaried employees over the next seven years prior to premium reductions and rebate;
• Employee premiums over the next seven years for earnings included in insured employment of salaried employees, net of refunds that apply in certain situations (e.g., insurable earnings below \$2,000, over contributions due to multiple employments in the year) and prior to premium reductions for provincial plans; and
• Employee premiums over the next seven years for self-employed individuals who voluntarily opted into the EI program prior to premium reductions for provincial plans.

Depending on the projected cumulative balance in the EI Operating Account as at 31 December 2022, the 7-year forecast break-even rate could either increase or decrease. For 2023, given that the projected EI Operating Account as of 31 December 2022 is projected to be in deficit, the amortization of the projected EI Operating account balance increases the 7-year forecast break-even rate.

The formula for calculating the 7-year forecast break-even rate is developed as follows:

EI Expenditures (over the next 7 years) = Revenues (over the next 7 years) + EIOA as at 31 December 2022

Text Description - Equation for Expenditures

The EI expenditures over the next 7 years are equal to the sum of the revenues over the same period and the EI Operating Account’s balance as of 31 December 2022.

The EI expenditures on the left side of the equation are expressed as the sum of the direct program expenditures, the amount of reduction in the employer premiums due to qualified wage-loss plans, the amount of reduction in employee and employer premiums due to provincial plans and the small business premium rebate that will offset costs of the new EI Training Support Benefit proposed in Budget 2019 and expected to launch in 2023.

The EI revenues on the right side of the equation represent the sum of employer premiums paid on behalf of salaried employees (prior to reductions for wage-loss plans, provincial plans and the small business premium rebate), salaried employee premiums (net of employee refunds prior to reductions for provincial plans) and employee premiums for self–employed (prior to reductions for provincial plans).

The employer premiums paid on behalf of salaried employees (prior to reductions for wage-loss plans, provincial plans and the small business premium rebate) are equal to 1.4 multiplied by the rate and the total insurable earnings for salaried employees prior to adjustments for employee premium refunds (referred to as TIE).

The salaried employee premiums (net of employee refunds prior to reductions for provincial plans) are equal to the product of the rate, the TIE and (1 minus the average adjustment over the next 7 years to reflect employee premium refunds, expressed as a percentage of TIE).

The employee premiums for self-employed (prior to reductions for provincial plans) are calculated by multiplying the rate by the total self-employed earnings over the next 7 years for individuals who opted into the EI program.

The resulting 7-year forecast break-even rate is equal to the ratio of the sum over the next 7 years of the direct program expenditures, the amount of reduction in employer premiums due to qualified wage-loss plans, the amount of reduction in employee and employer premiums due to the provincial plans and the small business premium rebate that will offset costs of the new EI Training Support Benefit proposed in Budget 2019 and expected to launch in 2023 net of the EI Operating Account’s balance as of 31 December 2022 over the earnings base of residents of all provinces over the next 7 years.

The earnings base of residents of all provinces over the next 7 years is calculated as:

1.4 times the TIE, plus the TIE times (1 minus the adjustment to reflect employee premium refunds which is expressed as a percentage of TIE) plus the total self-employed earnings for individuals who opted into the EI program.

Where:

• RWLP = amount of reduction in employer premiums due to qualified wage-loss plans over the next 7 years;
• RPP = amount of reduction in employee and employer premiums due to provincial plans over the next 7 years;
• RSBPR = small business premium rebate to offset costs of the new EI training support benefit proposed in Budget 2019 and expected to launch in 2023;
• EIOA = EI Operating Account as of 31 December 2022 (surplus/(deficit));
• TIE = total insurable earnings over the next 7 years for salaried employees prior to adjustments for employee premium refunds;
• PR% = average adjustment over the next 7 years to reflect employee premiumrefunds (as a percentage of TIE);
• TSEE = total self-employed earnings over the next 7 years for individuals who opt into the EI program.

A description of the assumptions used in projecting the variables included in the above formulas is provided in Section 4 of the main report, with additional supporting information provided in Appendix D.

### B.2. Reduction in Employer Premiums Due to Qualified Wage-Loss Plans

Generally, EI premiums paid by the employer are equal to 1.4 times the premiums deducted by the employer on behalf of the employee, referred to as the employer multiplier. However, pursuant to subsection 69(1) of the EI Act, the employer premiums can be reduced through a lower employer multiplier when its employees are covered under a qualified wage-loss plan which reduces EI special benefits otherwise payable, provided that at least 5/12 of the reduction is passed on to the employees.

In accordance with sections 63, 64, 65 and 66 of the Employment Insurance Regulations (“EI Regulations”), there are four distinct categories of qualified wage-loss plans, and a separate rate of reduction, expressed as a percentage of insurable earnings, is calculated annually for each category. These rates of reduction are then converted into reduced employer multipliers for each category and applicable premium rate. The principle in determining the rates of reduction is that the EI program is paying lower sickness benefits due to the presence of qualified wage-loss plans, and that these savings to the EI program should be passed on to the employers who sponsor these plans and their employees. For administrative simplicity, the full premium reduction is provided to the employer who is then responsible for returning the employees’ portion of the reduction to them.

As discussed in the previous subsection, the projection over seven years of the reduction in employer premiums due to qualified wage-loss plans is taken into account in the determination of the 7-year forecast break-even rate. For this purpose, it is viewed as a cost to the EI program and included in the numerator of the 7-year forecast break-even rate calculation. However, the cost to the EI program of granting premium reductions to employers with qualified wage-loss plans is offset by the savings to the EI program generated by lower EI sickness benefits due to the existence of qualified wage-loss plans. In addition to determining the 7-year forecast break-even rate, one of the purposes of this report is to determine the reduction in employer premiums due to qualified wage‑loss plans that will apply for 2023. The remainder of this subsection provides summarized information on this.

The methodology to calculate the rates of reduction applicable for 2023 is prescribed in section 62 of the EI Regulations. Pursuant to this section, the employer’s premium rate shall be reduced by the percentage by which the first payer cost ratio in respect of all insured persons exceeds the experience cost ratio in respect of insured persons covered by a qualified wage-loss plan of that employer’s category. The formula used in determining the rate of reduction of each category is provided below:

Rate of reduction(x) = First Payer Cost ratio – Experience Cost ratio(x)

Where: x = Category of wage-loss plan (1 to 4).

#### First-Payer Cost (FPC) ratio

The FPC ratio, which is identical for all insured persons and categories, represents the average estimated job-attachedFootnote 8 EI sickness benefits that would have been paid if benefits payable under a group sickness or disability wage-loss indemnity plan or paid sick leave plan were disregarded for purposes of determining benefits otherwise payable to persons under the EI Act. It is expressed as a percentage of average insurable earnings for all insured persons. The FPC for each year is determined by multiplying the hypothetical number of first payer job-attached EI sickness benefit weeks by the average weekly sickness benefits that would apply in such circumstance.

For the purposes of calculating the 2023 rates of reduction, the FPC ratio is equal to the average of the FPC for the years 2019 to 2021, divided by the average insurable earnings of all insured persons for the years 2019 to 2021. The formula used in determining the FPC ratio is provided below:

$\mathrm{FPC ratio}=\frac{\mathrm{FPC \left(2021\right) + FPC \left(2020\right) + FPC \left(2019\right)}}{\mathrm{TIE \left(2021\right) + TIE \left(2020\right) + TIE \left(2019\right)}}$

Text Description - First-Payer Cost (FPC) ratio

The first payer cost ratio is calculated by dividing the sum of the first payer cost for years 2021, 2020 and 2019 by the sum of the total insurable earnings for years 2021, 2020 and 2019 for all salaried employees, prior to adjustments for employee premium refunds.

Where: TIE = total insurable earnings for all salaried employees prior to adjustments for employee premium refunds.

#### Experience Cost (EC) ratio

The EC ratio is different for each category and reflects the actual average job‑attached EI sickness benefits paid for each category. It is expressed as a percentage of average insurable earnings for the insured persons in that category.

The EC for each year and category, as well as the allocation of insurable earnings amongst categories are based on an analysis of administrative data provided by Service Canada and ESDC.

Similarly to the calculation of the FPC ratio, for the purposes of calculating the 2023 rates of reduction, the EC ratio of each category is based on the years 2019 to 2021. The formula used in determining the EC ratio of each category is provided below:

$\mathrm{EC ratio \left(x\right)}=\frac{\mathrm{EC\left(x\right) \left(2021\right) + EC\left(x\right) \left(2020\right) + EC\left(x\right) \left(2019\right)}}{\mathrm{TIE\left(x\right) \left(2021\right) + TIE\left(x\right) \left(2020\right) + TIE\left(x\right) \left(2019\right)}}$

Text Description - Experience Cost (EC) ratio

The experience cost ratio for a given category of wage-loss plan (1 to 4) is equal to the sum of the experience cost of that category for years 2021, 2020 and 2019, divided by the sum of the total insurable earnings for years 2021, 2020 and 2019 for salaried employees of that given category, prior to adjustments for employee premium refunds.

Where:

• x = Category of wage-loss plan (1 to 4);
• TIE(x) = total insurable earnings for salaried employees of the category x, prior to adjustments for employee premium refunds.

#### Rates of Reduction and Amount of Premium Reduction

The resulting uniform FPC ratio applicable to all categories and the EC ratio of each category are used to determine the 2023 rates of reduction per category. The 2023 estimated insurable earnings per category are then used to estimate the 2023 employer premium reduction due to qualified wage-loss plans. The estimated employer premium reductions due to qualified wage-loss plans for years 2024 to 2029 reflect temporary measures and the enhancement of sickness benefits from 15 to 26 weeks starting by the end of 2022.

Additional supporting information on the calculation of the 2023 employer premium reduction due to qualified wage-loss plans and of each separate component is provided in Appendix E.

### B.3. Reduction in Premiums Due to Provincial Plan

In accordance with subsection 69(2) of the EI Act and related regulations, premiums paid by employees and their employers can be reduced when employees are covered under a plan established under provincial law which reduces EI maternity and parental benefits otherwise payable, provided that an agreement has been entered into between the Government of Canada and the province to establish a system for reducing premiums paid by residents of that province and their employers.

As discussed in the previous subsection, the projection over seven years of the reduction in premiums due to the presence of provincial plans is taken into account in the determination of the 7-year forecast break-even rate. For this purpose, it is viewed as a cost to the EI program and included in the numerator of the 7-year forecast break-even rate calculation. However, the cost to the EI program of granting these premium reductions is offset by the savings to the EI program generated by lower EI MP benefits due to the existence of provincial plans. In addition to determining the 7-year forecast break-even rate, one of the purposes of this report is to determine the reduction in premiums due to provincial plans that will apply for 2023. The remainder of this subsection provides more information on this.

Since 1 January 2006, the province of Québec has been responsible for providing maternity and parental benefits to the residents of Québec through the Québec Parental Insurance Plan (QPIP). Pursuant to subsection 69(2) of the EI Act and related regulations, a mechanism to reduce EI premiums paid by Québec residents and their employers was introduced. The reduced premium rate reflects the savings to the EI program due to the existence of the QPIP. To date, the QPIP is the only provincial plan established in Canada.

Pursuant to the agreement signed between the Government of Canada and the Government of Québec and in accordance with Part III.1 of EI Regulations, the 2023 premium reduction for the MP provincial plan in the province of Québec, also referred to as the QPIP reduction, is equal to the ratio of the 2023 EI MP expenditures, including EI MP benefits and the variable administrative costs related to administering EI MP benefits, to the 2023 earnings base of residents outside the province of Québec. Accordingly, the formula for the QPIP reduction is as follows:

Text Description - Equation for 2023 QPIP Reduction

The 2023 QPIP reduction is equal to the 2023 EI MPA expenditures divided by the 2023 earnings base for out-of-Quebec residents.

The earnings base for out-of-Quebec residents is developed as follows: 1.4 times the 2023 TIE for out-of-Quebec residents, plus the 2023 TIE for out-of-Quebec residents times (1 minus the adjustment to reflect employee premium refunds which is expressed as a percentage of TIE), plus the 2023 total self-employed earnings for out-of-Quebec residents who opted into the EI program.

Where:

• TIE(2023 OQ) = 2023 total insurable earnings for out-of-Québec resident salaried employees, prior to adjustments for employee premium refunds;
• PR% = adjustment to reflect 2023 employee premium refunds (as a percentage of TIE);
• TSEE(2023 OQ) = 2023 total self-employed earnings for out-of-Québec residents who opted into the EI program.

## Appendix C - Maximum Insurable Earnings (MIE)

Section 4 of the Employment Insurance Act (“EI Act”) provides details on how to determine the yearly MIE, the income level up to which EI premiums are paid and up to which EI benefits are calculated.

Based on the EI Act, the annual MIE is set at \$39,000, beginning in 1996, until this threshold is surpassed by 52 times the product obtained by multiplying:

1. the average for the 12-month period ending on April 30 in the preceding year of the Average Weekly Earnings (AWE), according to the latest revision of Statistics CanadaFootnote 9, for each month in that period

by

2. the ratio that the average for the 12-month period ending on April 30 in that preceding year of the AWE for each month in that 12-month period bears to the average for the 12-month period ending twelve months prior to April 30 of that preceding year of the AWE for each month in that 12-month period ending twelve months prior to April 30 of that preceding year.

In the year in which the threshold is surpassed, the MIE is equal to the amount calculated as described above and is rounded down to the nearest multiple of \$100.

For subsequent years, the MIE before rounding is equal to the previous year’s MIE before rounding, multiplied by the average of the AWE for each month for the twelve-month period ending on April 30 of the previous year divided by the average of the AWE for each month for the twelve‑month period ending on April 30 in the year prior to the previous year. This unrounded MIE is then rounded down to the nearest multiple of \$100.

In accordance with the EI Act, the first time the \$39,000 threshold was exceeded was for 2007. The revised unrounded MIE for 2007 is \$40,072.92Footnote 10.

The unrounded MIE for 2023 is equal to the unrounded MIE from 2007 (\$40,072.92) multiplied by the average of the AWE for each month for the twelve month period ending 30 April 2022 (\$1,141.7358) divided by the average of the AWE for each month for the twelve month period ending 30 April 2006 (\$743.5792).

${\mathrm{MIE}}_{\mathrm{2023}}={\mathrm{MIE}}_{\mathrm{2007}}×\frac{{\mathrm{AWE}}_{\mathrm{2022}}}{{\mathrm{AWE}}_{\mathrm{2006}}}$
$=\mathrm{40,072.92}×\frac{\mathrm{1,141.7358}}{\mathrm{743.5792}}=\mathrm{61,530.35}$

Text Description - Equation for Maximum Insurable Earnings

The 2023 MIE is calculated by multiplying the 2007 MIE by the ratio of the 2022 AWE to the 2006 AWE, that is, \$40,072.92 times \$1,141.7358 divided by \$743.5792, which is equal to \$61,530.35.

Rounded down to the nearest multiple of \$100, the MIE is \$61,500 for 2023. This is an increase of \$1,200 or 2.0% from the 2022 MIE of \$60,300.

Table 25 Maximum Insurable Earnings (\$)
Year12-Month AWE Average as of 30 AprilRevised Unrounded MIEApplicable MIE% Change in Applicable MIE
2005717.475039,000.0039,000-nil
2006743.579239,000.0039,000-nil
2007764.870840,072.9240,0002.6%
2008796.588341,220.3741,1002.8%
2009814.810842,929.6942,3002.9%
2010830.080043,911.7343,2002.1%
2011862.285844,734.6244,2002.3%
2012878.453346,470.2545,9003.8%
2013901.404247,341.5547,4003.3%
2014919.194248,578.4248,6002.5%
2015943.494249,537.1549,5001.9%
2016952.987550,846.7350,8002.6%
2017961.510051,358.3451,3001.0%
2018985.477551,817.6451,7000.8%
20191,007.026753,109.2953,1002.7%
20201,045.033354,270.6254,2002.1%
20211,119.195856,318.8756,3003.9%
20221,141.735860,315.6360,3007.1%
2023N/A61,530.3561,5002.0%

MIE for years prior to 2023 are not revised and are based on the legislation that applied at the time they were determined. However, the 2023 MIE reflects retroactive adjustments to the calculation in accordance with current legislation.

### 2023 Minimum Self-Employed Earnings (MSEE)

To qualify for EI special benefits, self-employed individuals who opted in the EI program need to earn at least the MSEE during the calendar year before the year they submit a claim. For claims filed in 2022, in accordance with subsection 11.1 of the EI Regulations, the unrounded MSEE of 2022 was \$8,092.14 of self‑employed earnings in 2021. It is adjusted annually on a compound basis by the same ratio used for the indexation of the MIE (see previous section), rounded down to the nearest dollar.

${\mathrm{MSEE}}_{\mathrm{2023}}={\mathrm{MSEE}}_{\mathrm{2022}}×\frac{{\mathrm{AWE}}_{\mathrm{2022}}}{{\mathrm{AWE}}_{\mathrm{2021}}}=\mathrm{8,092.14}×\frac{\mathrm{1,141.7358}}{\mathrm{1,119.1958}}=\mathrm{8,255.11}$

Text Description - Equation for Minimum Self-Employed Earnings

The minimum self-employed earnings for 2023 is calculated by multiplying the minimum self-employed earnings for 2022, by the ratio of the 2022 AWE to the 2021 AWE, that is, \$8,092.14 times \$1,141.7358 divided by \$1,119.1958, which is equal to \$8,255.11.

The MSEE for claims filed in 2023 is therefore set at \$8,255 of self-employed earnings in 2022. However, special temporary measures were put in place by the Government to decrease the amount of self-employed earnings required to make a claim. For claims established between 3 January 2021 and 25 September 2021, the threshold is lowered to \$5,000; then for claims established between 26 September 2021 and 24 September 2022, it is lowered to \$5,289.

## Appendix D - Data, Methodology and Assumptions

This appendix describes the data, methodology and assumptions that underlie the projections of the earnings base and expenditures included in this report. Although the assumptions have been developed using the most up-to-date available information, the resulting estimates should be interpreted with caution. These estimates are projections, and eventual differences between future experience and these projections will be analyzed and taken into account in subsequent reports.

### D.1. Prescribed Data

#### D.1.1. Minister of Employment and Social Development

Under subsection 66.1(1) of the Employment Insurance Act (“EI Act”), the Minister of Employment and Social Development (ESD) shall provide the Actuary, on or before 22 July of each year, with:

• the forecast change in payments to be made under paragraphs 77(1) (a), (b) or (c) of the EI Act during each of the following seven years if any changes to the payments to be made are announced;
• the forecast administration costs to be paid under paragraphs 77(1) (d), (d.1) and (g) of the EI Act during each of the following seven years, including any forecast change in those costs resulting from any change to the payments to be made under paragraphs 77(1) (a), (b) or (c) of the EI Act; and
• the total amounts charged to the EI Operating Account as of the last day of the most recent month for which that total is known.

For the purposes of determining the 2023 EI 7-year forecast break‑even rate under section 66 of the EI Act, the Minister of ESD has provided the Actuary with the following information:

Table 26 Prescribed Information Provided by the Minister of ESD (\$ million)
Part IActual
2021
Forecast
20222023202420252026202720282029
Pilot Projects/Special Temporary Measures
Support for Eligible Seasonal Claimants in Targeted Regions
12.866.9107.443.3-nil-nil-nil-nil-nil
Extending Max Duration of Work-Sharing Agreements
8.0-nil-nil-nil-nil-nil-nil-nil-nil
Work-Sharing Program - COVID-19
106.951.711.3-nil-nil-nil-nil-nil-nil
EI Transition Benefits
Regular Benefits
13.1% UR, 300 Hours Credit & Max 50 weeks
10,487.61,123.2-nil-nil-nil-nil-nil-nil-nil
Minimum Benefit Rate of \$500
3,641.0456.5-nil-nil-nil-nil-nil-nil-nil
Special Benefits
13.1% UR & 480 Hours CreditTable 26 Footnote *
730.0165.4-nil-nil-nil-nil-nil-nil-nil
Minimum Benefit Rate of \$500
587.7142.8-nil-nil-nil-nil-nil-nil-nil
Fishing Benefits
\$2,500 Entrance Requirement
0.40.0-nil-nil-nil-nil-nil-nil-nil
Enhanced Access - Prior Years Earnings
99.40.5-nil-nil-nil-nil-nil-nil-nil
Minimum Benefit Rate of \$500
10.31.6-nil-nil-nil-nil-nil-nil-nil
Waiving of Waiting Period
Regular Benefits
274.2-nil-nil-nil-nil-nil-nil-nil-nil
Special Benefits
118.2-nil-nil-nil-nil-nil-nil-nil-nil
Fishing Benefits
5.5-nil-nil-nil-nil-nil-nil-nil-nil
Minimum Benefit Rate of \$300
Regular Benefits
33.265.40.3-nil-nil-nil-nil-nil-nil
Special Benefits
5.420.50.1-nil-nil-nil-nil-nil-nil
Fishing Benefits
0.10.20.0-nil-nil-nil-nil-nil-nil
EI Simplification
Regular Benefits - Flat 420-hour Entrance Requirement & Minimum 14 Weeks Benefits
51.8528.0119.10.2-nil-nil-nil-nil-nil
Regular Benefits - Simplified Rules on Separation
81.7835.4195.60.4-nil-nil-nil-nil-nil
Special Benefits - Flat 420-hour Entrance RequirementTable 26 Footnote **
22.5211.047.40.1-nil-nil-nil-nil-nil
Fishing Benefits - \$2,500 Entrance Requirement
0.10.40.10.0-nil-nil-nil-nil-nil
Sub-Total16,276.83,669.5481.443.9-nil-nil-nil-nil-nil
Recent Proposed and Permanent Changes
Extending Maximum EI Sickness Weeks from 15 to 26
-nil79.8580.8794.6841.4890.4942.0996.61,054.4
Training Support Benefit
-nil-nil21.6285.0294.0296.3296.3296.3296.3
-nil-nil26.427.328.228.929.029.029.0
Sub-Total-nil79.8628.81,106.91,163.61,215.61,267.31,321.91,379.7
Total16,276.83,749.31,110.21,150.81,163.61,215.61,267.31,321.91,379.7
Part IIActual
2021‑22
Forecast
2022‑232023‑242024‑252025‑262026‑272027‑282028‑292029‑30
Employment Benefits and Support MeasuresTable 26 Footnote ***2,530.92,532.02,107.02,107.02,107.02,107.02,107.02,107.02,107.0

Table 26 Footnotes

Table 26 Footnote *

Rather than receiving a credit of hours, self-employed individuals can qualify with a lower earnings threshold of \$5,000.

Table 26 Footnote **

Rather than receiving a credit of hours, self-employed individuals can qualify with a lower earnings threshold of \$5,289.

Table 26 Footnote ***

Includes additional LMDA investment announced in Budget 2017.

Table 26 Footnote ****

Includes administration costs for the new EI Training Support Benefit proposed in Budget 2019 and expected to launch in 2022.

In addition, the Minister of ESD provided an EI Operating Account summary that shows a preliminary cumulative deficit of \$25.0 billion as of 31 March 2022, the most recent month for which that total is known.

Additional information with regards to the pilot projects, special measures and new permanent changes shown in Table 26 can be found below.

##### Pilot Projects and Special Temporary Measures

Budget 2018 first introduced a seasonal claimants’ pilot project to provide up to five additional weeks (to a maximum of 45 weeks) of EI regular benefits to eligible seasonal claimants in 13 targeted EI economic regions. The additional five weeks of benefits were originally available for claims established between 5 August 2018 and 30 May 2020. The period for the pilot project was then extended to include eligible claims established between 30 May 2020 and 25 September 2021. Subsequently, the temporary support for seasonal claimants was extended by one year through legislation in Budget 2021, to ensure continued support during the pandemic. Budget 2022 extended these rules until October 2023.

Budget 2016 extended the maximum duration of Work-Sharing agreements that began or ended between 1 April 2016 and 31 March 2017, from 38 weeks to 76 weeks. The Softwood Lumber Action Plan announced in June 2017 extended the maximum duration of Work-Sharing agreements beginning between 30 July 2017 and 28 March 2020 to support workers affected by the downturn in the Forestry sector. In June 2018, the Government of Canada also announced the extension to the maximum duration of Work-Sharing agreements from 19 August 2018 to 27 March 2021 to support workers who may be affected by the U.S. tariffs imposed on Canadian steel and aluminium shipments.

In March 2020, as part of the Government of Canada’s COVID-19 Economic Response Plan, the Government announced temporary changes to the Work-Sharing program. These changes included extending the duration of Work-Sharing agreements, waiving the mandatory cooling off period, expanding eligibility criteria, and streamlining the application process. The temporary measures were in place from 15 March 2020 to 14 March 2021. Budget 2021 announced an extension to these temporary measures until 24 September 2022.

Due to the COVID-19 pandemic, several interim orders were enacted over a short period of time with the aim of facilitating access to EI. Below is a summary of the provisions impacting eligible EI claims established between 27 September 2020 and 25 September 2021:

• A minimum unemployment rate of 13.1% used for all EI regions, which results in a uniform entrance requirement of 420 hours for eligibility to EI regular benefits (before application of hours credits).
• A one-time credit of 300 insurable hours, which combined with the minimum unemployment rate of 13.1%, results in benefit eligibility with 120 hours of work for EI regular benefits.
• A one-time credit of 480 insurable hours resulting in benefit eligibility with 120 hours of work for EI special benefits.
• A minimum weekly benefit rate of \$500 for EI regular benefits, fishing benefits and special benefits (\$300 for extended parental benefits).
• A maximum of 50 weeks of EI regular benefits.
• A common entrance requirement of \$2,500 in earnings for fishers to qualify for fishing or special benefits.
• The allowance for fishers to have their fishing benefits calculated using their actual fishing earnings for their current claim, or their fishing earnings from their claim for the same season from one of the two previous years, whichever is higher. This measure was extended to 18 December 2021.

Also, temporary measures were announced in Budget 2021 to facilitate access to EI in response to the COVID-19 pandemic and are summarized below. These measures are in effect from 26 September 2021 until 24 September 2022.

• A uniform entrance requirement of 420 insurable hours for eligibility to EI regular and special benefits.
• A common entrance requirement of \$2,500 in earnings for fishers to qualify for fishing benefits.
• A reduced entrance requirement of \$5,289 in earnings to access special benefits for self-employed workers who have opted in to the EI program.
• Ensuring that all insurable hours and employment count towards a claimant’s eligibility, as long as the last job separation is found to be valid.
• Allowance for claimants to start receiving EI benefits sooner by simplifying rules around the treatment of severance, vacation pay, and other monies paid on separation.

Finally, to facilitate access to EI, the one-week waiting period was waived for the following:

• All EI claims established between 27 September 2020 and 25 October 2020.
• New EI sickness claims established on or after 27 September 2020 for a period of one year to encourage compliance with public health measures.
• All EI claims established between 31 January 2021 and 25 September 2021.

Self-employed workers who have opted in to the EI program to access special benefits also benefited from a transition measure. For claims established between 3 January 2021 and 25 September 2021, they are able to use a 2020 earnings threshold of \$5,000 compared to the previous threshold of \$7,555.

On 30 July 2021, the Government announced a minimum benefit rate of \$300 per week for EI claims established between 26 September 2021 and 20 November 2021 in order to ensure that EI claimants receive a treatment similar to Canada Recovery Benefit claimants.

##### Recent Proposed and Permanent Changes

Budget 2022 announced the following changes:

• Amendments to Part II of the EI Act to broaden client and program eligibility and the types of interventions funded under Labour Market Development Agreements with provinces and territories.
• Establishment of the EI Board of Appeal, originally announced in 2019, to replace the current EI appeals process under the Social Security Tribunal General Division.

Budget 2021 announced the enhancement of sickness benefits from 15 to 26 weeks. This extension will take effect by the end of 2022.

Budget 2019 announced a new EI Training Support Benefit to help workers cover their living expenses when they require time off work to pursue training. The benefit will provide eligible claimants with up to four weeks of income support in a four-year period at 55 per cent of their average weekly insurable earnings. It was originally expected to launch in late 2020, but ESDC has indicated that it would be delayed to 2023. In addition, the Government announced an EI Premium Rebate for Small Businesses to help offset the upward pressure on EI premiums resulting from the introduction of the new EI Training Support Benefit. This rebate would be available to employers who pay employer EI premiums equal to or less than \$20,000 starting in 2023.

##### Part II

Budget 2017 announced additional funding under the LMDAs over six years starting in 2017‑2018 to provide more opportunities to Canadians to upgrade their skills, gain experience or get help to start their own business.

#### D.1.2. Minister of Finance

Under subsection 66.2(1) of the EI Act, the Minister of Finance shall provide the Actuary, on or before 22 July of each year, with the following:

• the most current forecast values of the economic variables relevant to the determination of the 7-year forecast break-even rate for the following seven years;
• the forecast amounts to be credited and charged to the EI Operating Account for the current year and an estimate of the total amounts credited to the Account as at 31 December of the previous year.

Accordingly, for the purposes of determining the 2023 EI 7-year forecast break‑even rate under section 66 of the EI Act, the Minister of Finance has provided the Actuary with the following information:

Actual Forecast 2021 2022 2023 2024 2025 2026 2027 31,326 31,764 32,205 32,634 33,064 33,483 33,899 34,311 34,717 20,387 20,729 20,925 21,065 21,196 21,314 21,407 21,547 21,720 18,872 19,615 19,757 19,868 19,997 20,104 20,179 20,314 20,479 16,203 16,942 17,022 17,063 17,132 17,186 17,213 17,302 17,426 2,669 2,673 2,734 2,804 2,864 2,919 2,966 3,012 3,052 1,515 1,114 1,169 1,197 1,199 1,210 1,228 1,233 1,242 7.4% 5.4% 5.6% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 1,131 1,194 1,239 1,275 1,312 1,350 1,388 1,427 1,467 2.9% 6.3% 3.4% 2.7% 2.9% 2.9% 2.8% 2.8% 2.8%

### D.2. Earnings Base

The earnings base represents the total insurable earnings on which salaried employees and their employers pay EI premiums, and the earnings on which self‑employed individuals that opted into the EI program pay EI premiums. The earnings base is comprised of:

• the total insurable earnings on which employers pay EI premiums prior to any adjustment for qualified wage-loss plans or the small business premium rebate;
• the total insurable earnings on which employees pay EI premiums, adjusted to reflect employee premium refunds; and
• the earnings on which self‑employed individuals that opted into the EI program pay EI premiums.

Section 4 of the report presents an overview of the assumptions used in determining the earnings base. The following subsections provide additional information and data in support of the development of these assumptions.

#### D.2.1. Number of Earners

In order to calculate the earnings base, an assumption is required for the number of earners, as well as the split of these earners between those who have earnings below and above the maximum insurable earnings (MIE).

The annual statistic on the number of employees provided by the Minister of Finance represents an average of the number of individuals who work for a public or private sector employer in a month. The number of earners provided by CRA is always greater than the average monthly number of employees since it represents a count of all individuals who received one or more T4 slips in the year and had employment income and/or insurable earnings during the year. This is mainly due to the fact that the number of earners includes all individuals who had earnings at any time during the year, whereas the number of employees only indicates a monthly average.

A historical comparison of the number of employees and the number of earners is presented in Table 28. The preliminary number of earners for 2021 is set such that the resulting insurable earnings are in line with the expected assessed premiums for 2021, which are derived from the 2021 year-to-date assessed premiums and the 2021 increase in average employment income provided by the Minister of Finance.

Table 28 Historical Comparison of the Number of Employees and Number of Earners (thousands)
Year Number of
Employees
Increase in Number
of Employees
Number of Earners
(CRA T4 Data)
Increase in Number
of Earners
Difference in
Annual Increases (%)
201515,189N/A18,851N/AN/A
201615,3140.83%18,8740.12%(0.71%)
201715,6131.95%19,2191.83%(0.12%)
201815,7430.83%19,6202.09%1.26%
201916,1152.36%19,9441.65%(0.71%)
202015,233(5.47%)19,600(1.73%)3.75%
202116,2036.37%20,7135.68%(0.69%)

The projected number of earners is obtained by a regression based on a correlated historical relationship from 1991 to 2020 between the number of earners and the number of employees.

Table 29 shows projected number of employees as provided by the Minister of Finance as well as the projected number of earners for the years 2022 to 2029.

Table 29 Projected Number of Earners (thousands)
Year Projected Number
of Employees
Increase in Number
of Employees
Projected Number
of Earners
Increase in Number
of Earners
202216,942N/A21,101N/A
202317,0220.47%21,1950.45%
202417,0630.24%21,2410.21%
202517,1320.41%21,3100.33%
202617,1860.31%21,3520.20%
202717,2130.16%21,3590.03%
202817,3020.52%21,4360.36%
202917,4260.72%21,5550.56%

As shown in Table 30, based on information with regards to the historical number of earners across income ranges, the distribution of earners by level of average employment income is fairly stable from year to year.

Table 30 Historical Distribution of Earners by Level of Average Employment Income
YearAverage
Employment
Income (\$)
Range as a % of Average Employment Income
0 - 25%25 - 50%50 - 75%75 - 100%100 - 125%> 125%
201547,22322.0%14.7%13.3%12.4%9.9%27.8%
201646,87221.4%14.6%13.2%12.4%10.0%28.4%
201748,20021.6%14.5%13.3%12.4%9.9%28.2%
201849,70920.9%14.4%13.8%12.7%10.2%28.0%
201951,08220.8%14.4%13.8%12.8%10.2%27.9%
202051,42223.1%13.8%12.3%12.0%10.1%28.7%

The 2020 distribution of the number of earners by level of average employment income is used to determine the proportion of earners with employment income below and above the MIE for years 2021 to 2029.

Table 31 shows the resulting split of the number of earners between those with employment income below the MIE and those with employment income above the MIE. Actual data is also shown for years 2015 to 2020.

Table 31 Number of Earners Below and Above the MIE
YearMIE (\$)MIE as a Proportion
of Average
Employment Income
Proportion
of Earners
Below MIE
Total Number
of Earners
(thousands)
Number
of Earners
Below MIE
(thousands)
Number
of Earners
Above MIE
(thousands)
201549,5001.048264.5%18,85112,1686,683
201650,8001.083865.3%18,87412,3276,547
201751,3001.064364.7%19,21912,4256,794
201851,7001.040063.8%19,62012,5137,107
201953,1001.039563.7%19,94412,6977,247
202054,2001.054063.7%19,60012,4787,121
202156,3001.064064.0%20,71313,2547,459
202260,3001.072264.3%21,10113,5787,524
202361,5001.057763.7%21,19513,5037,692
202465,1001.090565.2%21,24113,8397,402
202567,4001.097065.4%21,31013,9457,365
202669,3001.096665.4%21,35213,9687,384
202771,3001.097865.5%21,35913,9857,374
202873,4001.099265.5%21,43614,0487,388
202975,4001.098265.5%21,55514,1177,438

#### D.2.2. Average and Total Employment Income

The projected increase in average employment income, provided by the Minister of Finance, combined with the increase in the projected number of earners, are used to determine the total employment income for years 2021 to 2029. Table 32 shows the derivation of the projected total employment income for years 2021 to 2029, as well as actual data provided by CRA for years 2015 to 2020.

Table 32 Projected Total Employment Income
YearNumber of
Earners from
CRA T4 Data
(thousands)
Increase in
Number of
Earners
Average
Employment
Income from
CRA T4 Data (\$)
Increase in
Average
Employment
Income
Increase in Total
Employment
Income
Total
Employment
Income
(\$ thousand)
201518,851N/A47,223N/AN/A890,187,256
201618,8740.12%46,872(0.74%)(0.62%)884,643,535
201719,2191.83%48,2002.83%4.71%926,339,401
201819,6202.09%49,7093.13%5.28%975,279,385
201919,9441.65%51,0822.76%4.46%1,018,784,902
202019,600(1.73%)51,4220.67%(1.07%)1,007,872,380
2021N/A5.68%N/A2.90%8.74%1,095,965,164
2022N/A1.87%N/A6.29%8.28%1,186,763,030
2023N/A0.45%N/A3.39%3.85%1,232,448,914
2024N/A0.21%N/A2.67%2.89%1,268,086,831
2025N/A0.33%N/A2.91%3.25%1,309,254,357
2026N/A0.20%N/A2.86%3.06%1,349,363,896
2027N/A0.03%N/A2.77%2.80%1,387,195,361
2028N/A0.36%N/A2.82%3.19%1,431,381,809
2029N/A0.56%N/A2.82%3.39%1,479,908,227

As shown in Table 33, the historical distribution of total employment income as a percentage of average employment income is usually stable from year to year.

Table 33 Historical Distribution of Employment Income as a % of Average Employment Income
YearAverage
Employment
Income (\$)
Range as a % of Average Employment Income
0 - 25%25 - 50%50 - 75%75 - 100%100 - 125%> 125%
201547,2232.3%5.4%8.3%10.8%11.1%62.1%
201646,8722.3%5.4%8.2%10.8%11.2%62.1%
201748,2002.3%5.4%8.3%10.8%11.1%62.0%
201849,7092.3%5.4%8.6%11.0%11.4%61.3%
201951,0822.3%5.4%8.6%11.2%11.4%61.2%
202051,4222.5%5.1%7.7%10.4%11.3%63.0%

The 2020 distribution of total employment income as a percentage of average employment income is used to determine the proportion of employment income that relates to earners with employment income below and above the MIE for years 2021 to 2029. Table 34 shows the total employment income split between earners with employment income below the MIE and earners with employment income above the MIE for years 2021 to 2029. Actual data is also shown for years 2015 to 2020.

Table 34 Distribution of Employment Income for Earners Below and Above the MIE
Year MIE (\$) MIE as a
Proportion
of Average
Employment
Income
Proportion of
Employment
Income
for Earners
Below MIE
Total
Employment
Income
(\$ thousand)
Total Employment
Income for
Earners Below MIE
(\$ thousand)
Total Employment
Income for
Earners Above MIE
(\$ thousand)
201549,5001.048229.1%890,187,256259,085,340631,101,916
201650,8001.083830.6%884,643,535271,084,982613,558,553
201751,3001.064329.8%926,339,401275,896,851650,442,550
201851,7001.040029.2%975,279,385285,255,566690,023,819
201953,1001.039529.3%1,018,784,902298,240,070720,544,832
202054,2001.054028.3%1,007,872,380285,174,882722,697,498
202156,3001.064028.6%1,095,965,164313,965,780781,999,383
202260,3001.072229.0%1,186,763,030344,532,427842,230,603
202361,5001.057728.3%1,232,448,914349,352,760883,096,155
202465,1001.090529.9%1,268,086,831379,105,965888,980,866
202567,4001.097030.2%1,309,254,357395,490,524913,763,832
202669,3001.096630.2%1,349,363,896407,309,453942,054,444
202771,3001.097830.2%1,387,195,361419,548,880967,646,481
202873,4001.099230.3%1,431,381,809433,839,835997,541,974
202975,4001.098230.3%1,479,908,227447,860,9461,032,047,282

#### D.2.3. Total Insurable Earnings

Total insurable earnings for salaried employees are equal to total employment income, up to the annual MIE, earned by a person employed in insured employment. They are used to determine the earnings base for salaried employees. Prior to any adjustments for employee premium refunds, the earnings base for salaried employees is equal to 2.4 times the total insurable earnings.

Historical information regarding total insurable earnings is derived from aggregate assessed EI premiums gathered from T4 slips of all salaried employees and is provided by CRA. Insurable earnings can be calculated by dividing gross EI premium revenues by 2.4 times the weighted-average premium rate. Gross EI premium revenues are derived by adding the following components to the net EI assessed premiums:

• Unadjusted employee premium refunds (multiple employments, insurable earnings below \$2,000 and net adjustments for Québec residents working outside of Québec and vice-versa);
• Employer premium reductions for qualified wage-loss plans;
• Net adjustment payments between the Government of Canada and the Government of Québec for Québec residents working outside of Québec and vice-versa; and

Gross EI premium revenues represent employee EI premiums deducted at source and the corresponding employer premium before adjusting for qualified wage-loss plans, and reflect the employee’s province of work. Therefore, the annual weighted-average premium rates are calculated from the split of insurable earnings between Québec and out-of-Québec as reflected in the T4 data provided by CRA (i.e., on a province of employment basis, not province of residence). The derivation of insurable earnings for years 2015 to 2020 from the CRA statement of premium revenue is shown in Table 35. Net premiums assessed for 2015 and 2016 shown in the table are prior to the reduction in premiums due to the small business job credit.

2015 2016 2017 2018 2019 2020 23,459.0 23,915.1 21,196.7 22,645.6 23,069.0 21,909.4 254.0 241.1 242.6 266.5 266.1 219.6 3.1 2.7 3.2 2.9 2.7 2.5 837.4 871.2 922.2 953.1 992.3 1,023.0 6.3 7.3 6.6 5.6 6.1 7.3 5.0 21.7 7.3 6.3 2.5 1.4 24,564.7 25,059.2 22,378.6 23,880.0 24,338.7 23,163.1 78.4% 78.2% 78.1% 78.0% 77.8% 77.5% 21.6% 21.8% 21.9% 22.0% 22.2% 22.5% 1.88% 1.88% 1.63% 1.66% 1.62% 1.58% 1.54% 1.52% 1.27% 1.30% 1.25% 1.20% 1.81% 1.80% 1.55% 1.58% 1.54% 1.49% 566,606 579,630 601,138 629,386 659,464 645,838

For employees with multiple employments in a year, the information is based on the combined total EI premiums. This means that although insurable earnings of each employment are capped at the MIE, the combined total insurable earnings can exceed the MIE. The adjustment to insurable earnings and the earnings base to reflect multiple employments is captured in the employee premium refund section.

The 2020 distributions of total number of earners and total employment income as a percentage of average employment income are used to calculate insurable earnings for years 2021 to 2029. Total employment income capped at the MIE is derived from these distributions. The resulting capped employment income is adjusted for consistency with total insurable earnings, which takes into account multiple employments as well as excluded employments. The adjustment varies based on expected changes in the unemployment rate; for 2021, the adjustment is expected to be 96.1%. It is expected to reach its ultimate value of 96.4% in year 2022.

Table 36 shows details of the projected total insurable earnings calculations for years 2021 to 2029, as well as actual data for years 2015 to 2020. The resulting insurable earnings for 2021 reflect the year-to-date assessed premiums and related total expected assessed premiums for the year.

Table 36 Projected Total Insurable Earnings
Year MIE (\$) Total
Employment
Income
for Earners
Below MIE
(\$ thousand)
Number of Earners Above MIE
(thousands)
Total
Employment
Income
for Earners
Above MIE,
Capped at MIE
(\$ thousand)
Total
Employment
Income,
Capped at MIE
(\$ thousand)
Total Insurable
Earnings
(\$ thousand)
Increase in
Total
Insurable
Earnings
201549,500259,085,3406,683330,817,311589,902,651566,606,136N/A
201650,800271,084,9826,547332,577,288603,662,269579,630,2522.30%
201751,300275,896,8516,794348,518,759624,415,610601,138,3183.71%
201851,700285,255,5667,107367,436,863652,692,429629,385,7084.70%
201953,100298,240,0707,247384,804,549683,044,619659,463,6574.78%
202054,200285,174,8827,121385,979,175671,154,057645,837,591-2.07%
202156,300313,965,7807,459419,951,483733,917,263705,578,8459.25%
202260,300344,532,4277,524453,668,958798,201,385769,622,5739.08%
202361,500349,352,7607,692473,074,721822,427,480792,740,3573.00%
202465,100379,105,9657,402481,901,484861,007,448829,813,2044.68%
202567,400395,490,5247,365496,389,826891,880,351859,596,8063.59%
202669,300407,309,4537,384511,682,874918,992,326885,727,4053.04%
202771,300419,548,8807,374525,790,897945,339,777911,121,1522.87%
202873,400433,839,8357,388542,267,841976,107,676940,775,3413.25%
202975,400447,860,9467,438560,852,8161,008,713,762972,201,1783.34%

#### D.2.4. Split of Total Insurable Earnings Due to Provincial Plan

On 1 March 2005, an agreement was reached between the Government of Canada and the Government of Québec, which gave the Government of Québec the means to set up, starting 1 January 2006, the Québec Parental Insurance Plan (QPIP). Under the QPIP, Québec is responsible for maternity and parental (MP) benefits claimed by residents of Québec. The final agreement between the Governments of Canada and Québec includes a financial mechanism whereby the Government of Canada reduces EI premiums paid by Québec residents and their employers so that the Government of Québec can collect premiums for its own program. The premium reduction reflects the savings to the EI Account realized as a result of Québec's program, including MP benefits that are no longer paid under EI and administrative savings.

Given that eligibility for the QPIP is based on the province of residence, for the purposes of calculating the QPIP reduction, insurable earnings must be split between Québec and all other provinces based on the province of residence. The information regarding historical insurable earnings provided by CRA (T4 basis) is based on the province of employment. Therefore, an adjustment is required to transfer insurable earnings from Québec to out-of-Québec and vice-versa to reflect the province of residence.

##### Split Based on Province of Employment (T4)

Premiums are remitted by employers and employees based on province of employment, i.e., on a T4 basis. The information regarding historical insurable earnings provided by CRA is also on a T4 basis and is therefore based on the province of employment. The historical distribution of insurable earnings on a T4 basis shows that the proportion of insurable earnings that relates to employment in Québec generally decreased until 2015; between 2015 and 2021, a slight increase was observed. Based on the historical pattern, it is expected that the proportion of insurable earnings that relates to employment in Québec will slightly decrease starting in 2022 and over the 7-year projection period but will remain close to 22.5%. This is highlighted in Table 37.

Table 37 Split of Insurable Earnings Between Québec and Out-of-Québec, Based on Province of Employment (T4 data)
Year Proportion of Insurable Earnings
for Employment in Québec
Proportion of Insurable Earnings
for Employment Out-of-Québec
201521.64%78.36%
201621.84%78.16%
201721.91%78.09%
201821.97%78.03%
201922.22%77.78%
202022.53%77.47%
202122.72%77.28%
202222.70%77.30%
202322.68%77.32%
202422.66%77.34%
202522.63%77.37%
202622.61%77.39%
202722.59%77.41%
202822.56%77.44%
202922.54%77.46%

The proportions shown in the table above are used to split the insurable earnings between Québec and out-of-Québec based on province of employment. Adjustments to these proportions are required to reflect the province of residence.

##### Split Based on Province of Residence (T1)

The premiums are remitted based on the province of employment, in accordance with the Canada-Québec Agreement and for the purpose of facilitating inter-provincial mobility. However, when a worker’s premium, as well as the related employer’s premium is collected under the EI MP or the QPIP, and the person for whom the premium is collected is not covered by the regime to which they have contributed because of their province of residence, adjustment payments between the Government of Canada and the Government of Québec are made as long as this person is covered under the other regime. These adjustment payments are based on information included in individual tax returns and reflect the province of residence as of 31 December.

The information on historical assessed premiums provided by CRA includes the annual adjustment payments between the Government of Canada and the Government of Québec. A split between the employee adjustment payments and the employer adjustment payments, and a split between the transfer from the Government of Canada to the Government of Québec and vice-versa is provided. Table 38 shows the detailed adjustment payments between both parties for calendar years 2015 to 2020. The adjustment payments for calendar year 2020 are preliminary.

2015 2016 2017 2018 2019 2020 12,241 13,145 13,652 14,238 15,164 15,025 15,920 17,283 17,884 18,620 19,949 19,919 28,161 30,428 31,537 32,858 35,112 34,944 13,285 13,562 14,782 16,078 16,681 15,476 8,581 9,528 10,196 11,179 12,292 12,211 21,866 23,090 24,978 27,257 28,972 27,688 (1,044) (417) (1,130) (1,840) (1,517) (451) 7,339 7,755 7,688 7,441 7,657 7,708 6,295 7,338 6,558 5,601 6,140 7,256

The rules on how these adjustment payments are calculated are established in Division 4 of the Employment Insurance Regulations and Division 5 of An Act Respecting Parental Insurance (QPIP). Under these rules, the employer adjustment payment for each T4 slip of a given employee is generally equal to that employee’s insurable earnings times the QPIP reduction times the employer’s multiplier. Therefore, by using the aggregate employer adjustment payments provided by CRA and an average employer multiplier, it is possible to calculate the insurable earnings of Québec residents working outside of Québec and vice-versa. Given that a similar exercise is not possible using the employee adjustment payments due to different rules that apply to various individual situations, the employer adjustment payments are used to calculate the transfer of insurable earnings on a province of employment basis from Québec to out‑of‑Québec and vice-versa to reflect the province of residence.

Based on information provided by CRA, insurable earnings for employees who reside in Québec and work outside of Québec correspond to 0.63% of total insurable earnings on average for the last three years of available data (2018 to 2020). Insurable earnings for employees who reside outside of Québec and work in Québec correspond to 0.38% of total insurable earnings for the same period. The resulting net effect is that, from the split based on province of employment, an average net transfer of 0.25% of total insurable earnings from out-of-Québec to Québec occurs to reflect the province of residence. This is outlined in Table 39.

2015 2016 2017 2018 2019 2020 566,606,136 579,630,252 601,138,318 629,385,708 659,463,657 645,837,591 0.34% 0.36% 0.36% 0.36% 0.37% 0.38% 1.32 1.32 1.30 1.30 1.30 1.29 1.31 1.31 1.29 1.30 1.30 1.29 15,920 17,283 17,884 18,620 19,949 19,919 8,581 9,528 10,196 11,179 12,292 12,211 3,550,507 3,644,693 3,820,121 3,970,754 4,147,444 4,060,847 1,928,919 2,025,281 2,193,687 2,395,209 2,556,477 2,482,817 1,621,588 1,619,412 1,626,434 1,575,544 1,590,967 1,578,030 0.63% 0.63% 0.64% 0.63% 0.63% 0.63% 0.34% 0.35% 0.36% 0.38% 0.39% 0.38% 0.29% 0.28% 0.27% 0.25% 0.24% 0.24%

The information included in the administrative files that are exchanged between CRA and Revenu Québec was used to validate the methodology developed to estimate the transfer of insurable earnings using aggregate data. This file includes information on all tax filers who are Québec residents and work outside of Québec and vice-versa. The actual insurable earnings of Québec residents working outside of Québec (roughly 118,000 people in 2020) and of non‑Québec residents working in Québec (roughly 94,000 people in 2020) were close to the ones calculated on an aggregate basis.

It is assumed that the net transfer of insurable earnings on a T4 basis to reflect actual province of residence for years 2021 to 2029 will be equal to the average transfer for years 2018 to 2020, that is 0.25%. The resulting insurable earnings on a province of residence basis are outlined in Table 40.

Table 40 Split of Salaried Insurable Earnings Based on Province of Residence
YearProportion of
Insurable Earnings -
Province of Work
(T4 Basis)
Net
Transfer
to Québec
Proportion of
Insurable Earnings -
Province of
Residence
Total Insurable Earnings - Province of Residence
(\$ thousand)
202077.47%22.53%0.24%77.23%22.77%645,837,591498,752,352147,085,240
202177.28%22.72%0.25%77.03%22.97%705,578,845543,507,384162,071,461
202277.30%22.70%0.25%77.05%22.95%769,622,573592,994,193176,628,381
202377.32%22.68%0.25%77.07%22.93%792,740,357610,964,993181,775,364
202477.34%22.66%0.25%77.09%22.91%829,813,204639,702,999190,110,205
202577.37%22.63%0.25%77.12%22.88%859,596,806662,921,057196,675,749
202677.39%22.61%0.25%77.14%22.86%885,727,405683,250,120202,477,285
202777.41%22.59%0.25%77.16%22.84%911,121,152703,021,081208,100,071
202877.44%22.56%0.25%77.19%22.81%940,775,341726,184,485214,590,855
202977.46%22.54%0.25%77.21%22.79%972,201,178750,636,530221,564,648

In general, salaried employees contribute EI premiums on their total insurable earnings in a given tax year up to the annual MIE limit. However, when filing their tax returns, employees will receive a refund if they have exceeded the maximum contribution due to multiple employments in the same year or if their insurable earnings were below \$2,000. The insurable earnings that are subject to any subsequent premium refund must be excluded from the earnings base. The data from T4 slips that are used for projection purposes include insurable earnings for which premiums may later be refunded. Therefore, an adjustment must be made to reduce the earnings base. In addition, since the employer does not receive a refund, only the employee’s portion of the total earnings base is adjusted.

The annual employee refunds provided by CRA reflect the net impact of total EI premiums paid and the employee adjustment payments between the Government of Canada and the Government of Québec to account for employees who reside in Québec and work outside of Québec and vice-versa.

For example, the information provided for a resident outside of Québec who is working in Québec for the same employer throughout the year will include a refund equal to the difference between the premium paid to the QPIP and the premium owed for EI MP coverage. However, the total insurable earnings should not be adjusted to reflect this refund.

Another example is the case of a Québec resident who is working outside of Québec and who has exceeded the maximum EI contribution due to multiple employments in the year. In this case, the refund provided by CRA is net of the QPIP premium payable. The insurable earnings base should be adjusted for the refund related to the EI premium overpayment rather than the EI premium overpayment minus the QPIP premium payable.

The refunds provided by CRA must therefore be adjusted to reflect only refunds that relate to multiple employment and insurable earnings below \$2,000. They should be decreased by any refund that relates to QPIP premiums paid by out‑of‑Québec residents who worked in Québec and increased by any QPIP premiums payable by Québec residents who had multiple employments and worked outside of Québec. Given that the latter is not as common, the adjusted premium refunds will be lower than the refunds provided by CRA.

The adjusted premium refunds are estimated such that the net assessed premiums shown in Table 35 remain unchanged after taking into account the split of insurable earnings based on province of residence. In the reconciliation of the net assessed premiums using the province of residence (Table 41), the net adjustment payments (QPIP) shown in Table 35 are re-allocated between two items: the gross premium revenues and the premium refunds. Consequently, Table 41 shows net adjustment payments (QPIP) of \$0.

The portion of net adjustment payments that is re-allocated to gross premium revenues is calculated by taking the difference between gross premiums calculated using the weighted-average premium rate on a province of residence basis and gross premiums calculated using the weighted-average premium rate on a province of employment basis. Given that the proportion of Québec insurable earnings is higher under the province of residence basis and that Québec residents have a lower premium rate, the gross premium revenues on a province of residence basis are lower than those on a province of employment basis.

The portion of net adjustment payments that has not been allocated to the change in gross premium revenues to reflect the province of residence is allocated to premium refunds. The resulting adjusted premium refunds relate only to multiple employment and insurable earnings below \$2,000 and do not reflect any other adjustments due to the province of employment being different than the province of residence.

Table 41 shows the reconciliation of net premiums and the inherent calculation of adjusted premium refunds for years 2015 to 2020. By comparing this table to Table 35 for year 2020, it can be seen that adjustment payments of \$7.3 million are reflected in Table 41 through gross premiums that are \$14.1 million lower (\$23,163.1 – \$23,149.0) and in Table 42 through premium refunds that are \$6.8 million lower (\$219.6 – \$212.8), with no resulting effect on the total net premium.

2015 2016 2017 2018 2019 2020 566,606 579,630 601,138 629,386 659,464 645,838 78.1% 77.9% 77.8% 77.8% 77.5% 77.2% 21.9% 22.1% 22.2% 22.2% 22.5% 22.8% 1.88% 1.88% 1.63% 1.66% 1.62% 1.58% 1.54% 1.52% 1.27% 1.30% 1.25% 1.20% 1.81% 1.80% 1.55% 1.58% 1.54% 1.49% 24,551.3 25,045.1 22,364.5 23,866.4 24,324.7 23,149.0 246.9 234.4 235.2 258.5 258.2 212.8 3.1 2.7 3.2 2.9 2.7 2.5 837.4 871.2 922.2 953.1 992.3 1,023.0 - nil - nil - nil - nil - nil - nil 5.0 21.7 7.3 6.3 2.5 1.4 23,459.0 23,915.1 21,196.7 22,645.6 23,069.0 21,909.4

The adjusted premium refunds divided by the average premium rate are used to estimate the total insurable earnings subject to a subsequent employee refund. The calculations are based on historical data provided by CRA. Table 42 shows that the total insurable earnings subject to a subsequent employee refund as a percentage of total insurable earnings averages 2.42% from 2016 to 2020. It is assumed to remain constant at 2.42% until 2029.

2015 2016 2017 2018 2019 2020 566,606 579,630 601,138 629,386 659,464 645,838 246.9 234.4 235.2 258.5 258.2 212.8 1.81% 1.80% 1.55% 1.58% 1.54% 1.49% 13,674 13,022 15,172 16,363 16,799 14,247 2.41% 2.25% 2.52% 2.60% 2.55% 2.21%

#### D.2.6. Self-Employed Earnings

Pursuant to the Fairness for the Self-Employed Act, starting 31 January 2010, self-employed persons can enter into a voluntary agreement with the Canada Employment Insurance Commission (Commission) through Service Canada to participate in the EI program, contribute EI premiums at the employee rate and have access to special benefits. Self-employed residents of Québec will continue to receive maternity and parental benefits through the QPIP, however they are able to access sickness, compassionate care, and Family Caregiver Benefits through the EI program. As such, the earnings base used in calculating the 7-year forecast break-even rate must take into account the covered earnings of self-employed individuals who opt into the EI program.

Participants in the self-employed EI program contribute premiums on their covered earnings, (i.e., their self-employed earnings up to the annual MIE), at the employee rate corresponding to their province of residence, and there are no employer premium contributions. Therefore, as with salaried employees’ insurable earnings, self-employed covered earnings must be split between residents of Québec’s covered earnings and residents out-of-Québec’s covered earnings.

The expected increase in self-employed covered earnings reflects the expected increase in the number of participants, and the expected increase in average earnings of self-employed individuals.

##### Projected Number of Participants

ESDC tracks the number of weekly self-employed enrolments by province for the EI program and was able to provide enrolment data for each week up to June 2022. The enrolment data also includes adjustments for individuals who have opted out of the program in each week. Table 43 shows the evolution of the number of participants starting with the cumulative number as at 31 December 2010, with a split between Québec and out-of-Québec residents.

The higher than usual increase in the number of participants in 2020 is most likely due to the COVID‑19 pandemic. The assumption to complete year 2022 is based on the last 3-year average (2019-2021) of weekly enrolments for the last six months of each year. Between 2023 and 2029, the number of participants is expected to grow based on the average weekly enrolments over the last three years preceding the pandemic (2017-2019). The number of enrolments is projected independently for Québec and out-of-Québec residents and reflects the slower pace of enrolment of Québec residents.

Using cumulative enrolments up to June 2022 and projected enrolments, Table 43 shows the historical and projected number of self-employed participants from 2010 to 2029.

Table 43 Projected Self-Employed EI Participants
Cumulative Participants as
of the last week of
Out-of-Québec
Residents
Québec
Residents
Total
20104,4431,3675,810
20117,1142,4829,596
20129,0593,09212,151
201310,5743,35813,932
201411,8933,48215,375
201513,4223,65617,078
201614,9973,82418,821
201716,7083,97820,686
201818,4834,19822,681
201920,3224,42924,751
202033,0597,89240,951
202137,7348,70146,435
202241,4829,42850,910
202343,2579,63052,887
202445,0329,83254,863
202546,80710,03356,840
202648,58210,23558,817
202750,35710,43760,793
202852,16610,64262,808
202953,94110,84464,785
##### Increase in Average Earnings

Historical data on the evolution of average earnings of self-employed individuals who opted into the EI program compared to average earnings of all self‑employed individuals or of salaried employees are either not available or incomplete. As such, it is assumed that the average earnings of self-employed individuals who have opted into the EI program will increase at the same pace as the average earnings of salaried employees from 2022 to 2029.

The most recent year for which complete data is available with regards to self‑employed EI premiums and inherent covered earnings is tax year 2020. The projected increase in average employment earnings, combined with the increase in the number of self-employed participants are used to determine the self-employed covered earnings for years 2022 to 2029. It is important to note that regardless of the timing of enrolment during the year, premiums are paid on total covered earnings in that year. Table 44 shows the projected self‑employed covered earnings for Québec residents and out‑of‑Québec residents for years 2021 to 2029.

Table 44 Projected Covered Earnings for Self-Employed EI Participants (\$ thousand)
Increase in
Average
Earnings
Increase in
Number of
Participants
Increase in
Covered
Earnings
Total
Covered
Earnings
Increase in
Average
Earnings
Increase in
Number of
Participants
Increase in
Covered
Earnings
Total
Covered
Earnings
Total
Covered
Earnings
2021N/AN/AN/A326,263N/AN/AN/A54,904381,167
20226.29%9.9%16.9%381,2416.29%8.4%15.2%63,237444,478
20233.39%4.3%7.8%411,0223.39%2.1%5.6%66,778477,800
20242.67%4.1%6.9%439,3172.67%2.1%4.8%69,997509,314
20252.91%3.9%7.0%469,9272.91%2.1%5.0%73,513543,439
20262.86%3.8%6.8%501,7102.86%2.0%4.9%77,137578,847
20272.77%3.7%6.5%534,4392.77%2.0%4.8%80,835615,274
20282.82%3.6%6.5%569,2362.82%2.0%4.8%84,749653,984
20292.82%3.4%6.3%605,1832.82%1.9%4.8%88,787693,970

### D.3. Expenditures

EI expenditures include Part I and Part II (Employment Benefits and Support Measures) benefit payments, administration costs and doubtful debts. EI benefits also include temporary spending initiatives, such as pilot projects or special measures announced by the Government of Canada.

EI benefits paid under Part I of the EI Act include:

• Regular benefits, which provide temporary income support for unemployed persons;
• Fishing benefits, for self-employed fishers;
• Work-Sharing benefits, for workers willing to work a temporarily reduced work week to avoid lay-offs;
• Special benefits, for those who are sick (sickness benefits), pregnant or caring for a newborn or adopted child (maternity and parental benefits), for those caring for a seriously ill family member at end-of-life (compassionate care benefits), or for those providing care or support to a critically ill or injured family member (Family Caregiver benefits); and
• Training Support Benefit (proposed in Budget 2019 and expected to be launched in 2023).

To project EI expenditures, in addition to demographic and economic forecasts, a number of assumptions are required, namely average weekly benefits, number of potential claimants and recipiency rate. Those three assumptions are discussed below, and formulas for the projection of regular, fishing, Work-Sharing and special benefits are explained. Details on benefit repayments, Part II benefits, administration costs, bad debt expenses, penalties and interest on overdue accounts receivable are also included in this section.

#### D.3.1. Average Weekly Benefits

The average weekly benefits (AWB) are equal to benefit payments divided by the number of benefit weeks paid for Part I benefits.

Weekly benefits are generally equal to 55% of the claimant’s variable best weeks over the qualifying period (generally 52 weeks). The number of best weeks taken into account is determined by the regional unemployment rate and varies between 14 and 22 insurable earnings weeks.

The maximum amount payable is determined by the MIE. For 2023, the maximum weekly benefit is 55% of the \$61,500 annual MIE divided by 52, or \$650.

The AWB are determined by the sum of the change in the MIE and in the average weekly earnings, weighted by the proportion of benefit weeks for claimants with insurable earnings above and below the annual MIE and by the prior year AWB for claimants with insurable earnings above and below the annual MIE.

${\mathrm{AWB}}_{T}={\mathrm{AWB}}_{\mathrm{above\left(T-1\right)}}×\left({%}_{\mathrm{above\left(T\right)}}\right)×\frac{{\mathrm{MIE}}_{T}}{{\mathrm{MIE}}_{\mathrm{T-1}}}+{\mathrm{AWB}}_{\mathrm{below\left(T-1\right)}}×\left({%}_{\mathrm{below\left(T\right)}}\right)×\frac{{\mathrm{AWE}}_{T}}{{\mathrm{AWE}}_{\mathrm{T-1}}}$
${\mathrm{AWB}}_{\mathrm{growth}}={\mathrm{AWB}}_{T}/{\mathrm{AWB}}_{\mathrm{T-1}}-1$

Text Description - Equation for Average Weekly Benefits

The average weekly benefits growth is equal to the ratio of the average weekly benefits in the projection year to the previous year’s average weekly benefits, minus 1.

The average weekly benefits in the projection year are calculated as the sum of the following:

1. The previous year’s average weekly benefits for claimants with insurable earnings above the maximum insurable earnings (referred to MIE), multiplied by the percentage of benefit weeks for claimants in the projection year with insurable earnings above the MIE, and multiplied by the ratio of the MIE in the projection year to the prior year’s MIE.
2. The previous year’s average weekly benefits for claimants with insurable earnings below the MIE, multiplied by the percentage of benefit weeks for claimants in the projection year with insurable earnings below the MIE, and multiplied by the ratio of the average weekly earnings in the projection year to the prior year’s average weekly earnings.

Where:

• AWB = average weekly benefits;
• AWBabove = AWB for claimants with insurable earnings above the MIE;
• AWBbelow = AWB for claimants with insurable earnings below the MIE;
• MIE = maximum insurable earnings;
• AWE = average weekly earnings;
• %above = percentage of benefit weeks for claimants with earnings above the MIE; and
• %below = percentage of benefit weeks for claimants with earnings below the MIE.

The percentage of benefit weeks for claimants with insurable earnings above the annual MIE is based on an analysis of administrative data provided by ESDC.

The proportion of benefit weeks for claimants with earnings above the MIE was on average 47.2% between 2017 and 2019. The proportion decreased to 41.8% in 2020 and 37.9% in 2021, both due to the high proportion of lower-wage earners having lost their employment during the forced shutdown of the economy caused by the COVID‑19 pandemic. Based on partial data, this proportion is expected to increase to 44.3% in 2022. It is then assumed to increase in 2023 to its ultimate value of 47.2%.

Table 45 Percentage of Benefit Weeks for Claimants with IE above the MIE
Year% Above MIE
201444.6%
201547.2%
201648.0%
201746.5%
201847.0%
201948.0%
202041.8%
202137.9%
202244.3%
2023-202947.2%

The 2021 AWB for claimants with insurable earnings above and below the MIE was \$595 and \$409 respectively; the latter represents an estimated value without the minimum benefit rate of \$500.

Based on the growth in average weekly earnings and the MIE and on the proportion of benefit weeks for claimants with earnings above the MIE, the annual average weekly benefits growth rates are forecasted at 9.0% and 3.9% for 2022 and 2023 respectively. The average annual increase for years 2024 to 2029 is 3.2%. These AWB growth rates generally apply to all benefit types for 2023 onwards.

Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 1,131 1,194 1,239 1,275 1,312 1,350 1,388 1,427 1,467 3.0% 5.6% 3.8% 2.9% 2.9% 2.8% 2.8% 2.8% 2.8% 56,300 60,300 61,500 65,100 67,400 69,300 71,300 73,400 75,400 3.9% 7.1% 2.0% 5.9% 3.5% 2.8% 2.9% 2.9% 2.7% 37.9% 44.3% 47.2% 47.2% 47.2% 47.2% 47.2% 47.2% 47.2% 62.1% 55.7% 52.8% 52.8% 52.8% 52.8% 52.8% 52.8% 52.8% 1.9% 9.0% 3.9% 4.6% 3.3% 2.8% 2.9% 2.9% 2.8%

#### D.3.2. Potential Claimants

The EI Program is designed to provide temporary income support to eligible insured persons who have lost their jobs through no fault of their own, such as due to a shortage of work, or as a result of seasonal or mass lay-offs and are available for work.

Hence, to receive EI regular benefits, an individual needs to:

• be insured, that is, have paid EI premiums in the qualifying period, usually the 52 weeks preceding the claim for benefits;
• have lost their employment;
• have had a valid job separation; and
• be available for work.

The number of potential claimants is therefore estimated as the sum of:

• The number of unemployed individuals provided by the Minister of Finance from which is subtracted:
• The number of unemployed individuals without insurable earnings (IE) in the last 52 weeks, that is, self-employed, unpaid family workers and individuals who have not worked in the last 52 weeks;
• The number of unemployed individuals with an invalid job separationFootnote 11;
• The average number of EI regular beneficiaries currently employed, that is, individuals receiving regular benefits, but excluded from the unemployed statistics (beneficiaries Working While on Claim). These individuals need to be added since they are not accounted for in the definition of the unemployed.

The following table shows the development of the historical number of potential claimants.

Table 47 Historical Number of Potential Claimants (thousands)
Calendar
Year
Number of
Unemployed
(U)
No Insurable Earnings
in Last 52 Weeks
Invalid Job SeparationWorking BeneficiariesPotential Claimants
NumberAs a % of UNumberAs a % of UNumberAs a % of UNumberAs a % of U
20111,40354739.0%17912.7%966.9%77455.2%
20121,37553538.9%18813.7%926.7%74354.1%
20131,34751638.3%20114.9%856.3%71653.2%
20141,32050638.3%19714.9%836.3%70153.1%
20151,32748836.8%16412.4%866.5%76057.3%
20161,35950637.2%16211.9%886.5%77957.3%
20171,24950340.2%15012.0%887.1%68554.8%
20181,16446339.8%18315.8%776.6%59451.1%
20191,15442937.2%16314.2%746.4%63655.1%
20201,89748125.4%1588.3%854.5%1,34470.8%
20211,52069846.0%1107.2%25216.6%96363.4%

The number of unemployed individuals is provided by the Minister of Finance. Assumptions for the evolution of the number of unemployed individuals without insurable earnings in the last 52 weeks, the number of unemployed individuals with an invalid job separation and the number of working beneficiaries as a percentage of the number of unemployed are made as follows:

• The percentage of unemployed without insurable earnings in the last 52 weeks averaged 38.2% for the 10-year period ending in 2019. This percentage decreased significantly in 2020 due to the forced shutdown of the economy caused by the COVID‑19 pandemic. Compared to other years, more employees with insurable earnings in the last 52 weeks lost their job, putting downward pressure on the percentage of unemployed without insurable earnings in the last 52 weeks. This translated into an increase in the number of individuals without insurable earnings in the last 52 weeks between 2019 and 2021 from 429,000 to 698,000. Based on the experience observed for the first six months of 2022, the proportion of individuals with no insurable earnings in the last 52 weeks is expected to equal 46.0% in 2022. It is subsequently assumed to decrease to 38.0% of unemployed over the next three years and to remain constant at that level for the following years.
• The percentage of unemployed individuals with an invalid job separation is highly behaviour driven and fluctuates with the economic situation. A proportion of 8.3% was observed in 2020; it is expected to decrease to 7.2% in 2021, before increasing to an ultimate value of 13.5% in 2027. The large decrease observed in 2020 and 2021 is attributable to the forced shutdown of the economy caused by the COVID‑19 pandemic. Based on data published by Statistics Canada for 2021, a smaller proportion of people left their jobs for reason such as going to school, being dissatisfied, or retiring when compared to other years. This created downward pressure on the percentage of unemployed individuals with an invalid job separation.
• The ratio of working beneficiaries to unemployed is normally relatively stable and can be projected using an average of the last few years. However, given the COVID-19 pandemic, the ratio decreased in 2020 and increased significantly in 2021. Based on the first few months of available information for 2022, it is estimated that the ratio of working beneficiaries to unemployed will decrease in 2022 to a proportion of 7.0%. It will then decrease to an ultimate value of 6.5% in 2023.

The resulting projected proportion and number of potential claimants are presented in Table 48. The number of potential claimants as a percentage of unemployed is expected to increase from 49.8% in 2022 to 56.0% in 2025, before starting to decrease to reach its ultimate value of 55.0% in 2027.

Table 48 Projected Number of Potential Claimants
Calendar
Year
Number of
Unemployed (U)
(thousands)
No Insurable
Earnings in
Last 52 Weeks
(as a % of U)
Invalid Job
Separation
(as a % of U)
Working
Beneficiaries
(as a % of U)
Potential
Claimants
(as a % of U)
Potential
Claimants
Number
(thousands)
20221,11346.0%11.2%7.0%49.8%554
20231,16843.0%11.5%6.5%52.0%608
20241,19740.0%12.0%6.5%54.5%652
20251,19938.0%12.5%6.5%56.0%672
20261,21038.0%13.0%6.5%55.5%671
20271,22838.0%13.5%6.5%55.0%675
20281,23338.0%13.5%6.5%55.0%678
20291,24238.0%13.5%6.5%55.0%683

#### D.3.3. Recipiency Rate (Share of Potential Claimants Receiving Benefits)

Beneficiaries, as reported by Statistics Canada, refers to the number of active regular claimants in a given month who received EI regular benefits during the reference week of the labour force survey, usually the week containing the 15th day of the month. The recipiency rate represents the proportion of potential claimants in a given period who are receiving EI regular benefits and ignores individuals outside the target population of the EI program, such as the long-term unemployed and those who did not contribute to the program in the previous year. The recipiency rate is thus directly linked to the target population of the EI program (i.e., potential claimants).

The recipiency rate is normally lower than 100% for multiple reasons including:

• Some potential claimants have not accumulated the required number of insurable hours, which varies between 420 and 700 hours (without temporary measures) depending on the economic region in which they reside;
• Some potential claimants do not apply for benefits; and
• Some potential claimants are waiting to receive their benefits or have received benefits in the past but have exhausted the number of weeks they were entitled to receive regular benefits and remain unemployed.

For the purposes of forecasting regular benefit payments, historical recipiency rates shown in the following table are calculated based on the number of beneficiaries as reported by Statistics Canada and the number of potential claimants as discussed in the previous section.

Table 49 Historical Recipiency Rate
Calendar
Year
Number of Potential Claimants
(thousands)
Regular Beneficiaries
(thousands)
Recipiency
RateTable 49 Footnote *
201177460878.5%
201274355574.8%
201371652373.1%
201470150872.5%
201576053570.3%
201677956472.4%
201768553377.8%
201859446478.0%
201963645271.1%
20201,34464948.3%
20219631,328137.9%

Table 49 Footnotes

Table 49 footnote *

Actual recipiency rate including extra beneficiaries due to temporary measures.

Between 2011 and 2019, the recipiency rate varied between 70% and 78% depending on temporary measures put in place. In 2020, it decreased significantly to 48.3% due to a large proportion of people having received a benefit through emergency measures. In 2021, it increased to 137.9%Footnote 12. A factor that could explain the recipiency rate being exceptionally above 100% for 2021 is the 28‑week extension of the qualifying period for those who had claimed the EI ERB or the CERB, allowing them to receive a benefit without necessarily having received earnings in the last 52 weeks.

The preliminary projected recipiency rate estimateFootnote 13 for 2022 is 87.5% and it is assumed to decrease to an ultimate value of 75.0% in 2023. The data reporting on the EI program either identifies these individuals as ineligible for benefits or as eligible for a shorter period of time; consequently, the number of beneficiaries ends up higher than the number of eligible claimants.

#### D.3.4. Number of Weeks

EI expenditures are reported in the EI Operating Account on an accrual basis, that is, they are recorded in the period for which they should have been paid, without regards to the delay in processing the payment. For example, if a claimant is eligible to receive benefits starting the first week of December 2021, but receives his first benefit payment only in February 2022, the portion of the benefits that relates to December will be recorded in the EI Operating Account for the year 2021.

Furthermore, EI benefits are paid on a weekly basis, but only weekdays that belong to a particular period are reported in that period. For example, if December 31st is a Thursday, then for every benefit week that should have been paid for the week of December 31st, four days will be reported in the current calendar year, and one will be reported in the following calendar year.

The number of weeks affects Part I expenditures as benefits are payable for every weekday of the year, regardless of holidays. The number of workdays in a year ranges from 260 days to 262 days, resulting in a number of weeks ranging from 52.0 to 52.4 as shown in the following table.

Table 50 Number of Weeks
Calendar Year202120222023202420252026202720282029
Number of Weeks52.252.052.052.452.252.252.252.052.2

#### D.3.5. Regular Benefits

EI regular benefits provide temporary income support to eligible insured persons who have lost their jobs through no fault of their own, such as due to shortage of work, or seasonal or mass lay-offs, and are available to work.

Regular benefit payments are equal to the average weekly benefits multiplied by the number of weeks paid, as determined by the number of potential claimants multiplied by the recipiency rate and by the number of weeks in the year.

Text Description - Equation for Regular Benefits

The regular benefits are equal to the product of the number of potential claimants, the recipiency rate, the number of weeks in the year and the average weekly benefits. This is equivalent to the product of the number of weeks paid and the average weekly benefits.

Where:

• PC = number of potential claimants;
• RR = recipiency rate;
• W = number of weeks in the year; and
• AWB = average weekly benefits.

For projection purposes, the above formula is modified such that the increase in each variable is applied to the previous year’s EI regular benefits paid. As the actual regular benefit expenditures in the base year include expenditures attributed to a pilot project, it is first subtracted before the growth factors are applied.

The base year on which the projected growth factors are applied is 2021. Regular benefits are therefore projected as follows, starting from the base year.

Text Description - Equation for Projected Regular Benefits

The regular benefits in the projection year are equal to the prior year’s regular benefits times the yearly growth in potential claimants, the yearly growth in average annual benefits and the yearly growth in the ratio of potential claimants receiving benefits.

The yearly growth in potential claimants is calculated as the ratio of the number of potential claimants in the projection year to the prior year’s number of potential claimants.

The yearly growth in average benefits is calculated as the ratio of the number of weeks in the projection year to the previous year’s number of weeks, multiplied by the ratio of the average weekly benefits in the projection year to the previous year’s average weekly benefits.

The yearly growth in the ratio of potential claimants receiving benefits is equal to the recipiency rate in the projection year, divided by the previous year’s recipiency rate.

Where:

• PC = number of potential claimants;
• W = number of weeks in a year;
• AWB = average weekly benefits; and
• RR = recipiency rate.

The 2022 experience is adjusted based on known data up to June 2022 while the year 2023 is adjusted as to match the expected benefits projected from year 2019, the latest year of known actual regular EI income benefits not affected by the COVID-19 pandemic. The following adjustments were done:

• Average Weekly Benefits: +0.11% in 2022 and +0.95% in 2023
• Number of Weeks: +8.00% in 2023

The pilot project and special measures are then added to the base regular benefits projection as shown in Table 51.

Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 20,701 11,934 12,700 14,364 15,215 15,643 16,186 16,656 17,303 13 67 107 43 -nil -nil -nil -nil -nil 10,488 1,123 -nil -nil -nil -nil -nil -nil -nil 3,641 456 -nil -nil -nil -nil -nil -nil -nil 274 -nil -nil -nil -nil -nil -nil -nil -nil 33 65 0 -nil -nil -nil -nil -nil -nil 52 528 119 0 -nil -nil -nil -nil -nil 82 835 196 0 -nil -nil -nil -nil -nil 35,283 15,009 13,122 14,408 15,215 15,643 16,186 16,656 17,303

#### D.3.6. Fishing Benefits

As with regular benefits, fishing benefits are equal to the number of benefit weeks multiplied by the average weekly benefits. Fishing benefits can be projected from the base year (2021) using the expected change in the number of benefit weeks and average weekly benefits.

Text Description - Equation for Projected Fishing Benefits

The fishing benefits in the projection year are equal to the prior year’s fishing benefits times the yearly increase in average benefits.

The yearly increase in average benefits is calculated as the ratio of the number of weeks in the projection year to the previous year’s number of weeks, multiplied by ratio of the average weekly benefits in the projection year to the previous year’s average weekly benefits.

Where:

• FB = fishing benefits;
• W = number of weeks in the year; and
• AWB = average weekly benefits.

The 2022 experience is adjusted based on known data up to June 2022 while the year 2023 is adjusted as to match the expected benefits projected from year 2019, the latest year of known actual fishing benefits not affected by the COVID-19 pandemic. The following adjustments were done:

• Average Weekly Benefits: -1.94% in 2022 and -1.23% in 2023
• Number of Weeks: +45.00% in 2022

The base fishing benefits projection is shown in the following table. The projected benefits for the temporary measures are provided by the Minister of ESD.

 Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 252 389 399 421 433 445 458 469 484 0 0 -nil -nil -nil -nil -nil -nil -nil 99 0 -nil -nil -nil -nil -nil -nil -nil 10 2 -nil -nil -nil -nil -nil -nil -nil 6 -nil -nil -nil -nil -nil -nil -nil -nil 0 0 0 -nil -nil -nil -nil -nil -nil 0 0 0 0 -nil -nil -nil -nil -nil 368 392 399 421 433 445 458 469 484

#### D.3.7. Work-Sharing Benefits

To avoid temporary lay-offs due to a reduction in the normal level of business activity caused by factors that are beyond the control of the employer, employers and employees can enter into a Work-Sharing agreement with the Commission through Service Canada to provide EI income benefits to eligible workers willing to work a temporarily reduced work week. This enables employers to retain staff and adjust their work activity during temporary work shortages, as well as avoid the expenses of hiring and training new staff once business levels return to normal. Employees are able to retain their skills and jobs while receiving EI benefits for the days that they do not work.

Due to the Work-sharing benefits in 2021 being fully attributed to measures, the “Work-Sharing Benefits (Base)”, as seen in Table 53, is set to \$0 M. As such, expenditures cannot be projected from 2021 and are instead projected from year 2019.

Text Description - Equation for Projected Work-Sharing Benefits

The work-sharing benefits in the projection year are equal to the prior year’s benefits times the change in the number of employees and the yearly increase in average benefits.

The change in the number of employees is calculated as the ratio of employees in the projection year to the prior year’s employees.

The yearly increase in average benefits is calculated as the ratio of the number of weeks in the projection year to the previous year’s number of weeks, multiplied by the ratio of the average weekly benefits in the projection year to the previous year’s average weekly benefits.

Where:

• WSB = Work-Sharing benefits;
• EE = employees;
• W = number of weeks in a year; and
• AWB = average weekly benefits.

Table 53 shows the actual 2021 Work-Sharing benefits as well as the projection until 2029. The projected cost estimates for temporary measures shown in Table 53 are provided by the Minister of ESD.

 Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 0 1 16 16 17 17 18 19 19 8 - nil - nil - nil - nil - nil - nil - nil - nil 107 52 11 - nil - nil - nil - nil - nil - nil 115 53 27 16 17 17 18 19 19 Table 53 Footnotes Table 53 footnote *Work-Sharing benefits paid in 2021 and most of 2022 were attributed to the measures.Table 53 footnote **The maximum duration of Work-Sharing agreements was extended for agreements beginning between 30 July 2017 and 28 March 2020 to support workers affected by the downturn in the Forestry sector as well as for agreements beginning between 19 August 2018 and 27 March 2021 to support workers who may be affected by the U.S. tariffs imposed on Canadian steel and aluminium shipments.Table 53 footnote ***Changes to the Work-Sharing Program put in place in response to the COVID-19 pandemic include: extending the duration of Work-Sharing agreements, waiving the mandatory cooling off period, expanding eligibility criteria, and streamlining the application process. The temporary special Work-Sharing measures are in place until 24 September 2022.

#### D.3.8. Special Benefits

Special benefits include MP benefits, for those who are pregnant or caring for a newborn or adopted child, sickness benefits for those who are unable to work due to sickness, injury or quarantine, compassionate care benefits for those who take a temporary leave from work to provide care or support to a family member who is gravely ill and at risk of dying within 26 weeks, and benefits for those who take leave from work to provide care or support to a critically ill or injured family member (Family Caregiver benefits for children or adults).

##### Salaried

Each special benefit for salaried employees is forecasted from the base year 2021 using the expected change in the number of employees and in the average weekly benefits.

Text Description - Equation for Projected Special Benefits

The special benefits in the projection year are equal to the prior year’s special benefits times the change in the number of employees and the yearly increase in average benefits.

The change in the number of employees is calculated as the ratio of the number of employees in the projection year to the prior year’s number of employees.

The yearly increase in average benefits is calculated as the ratio of the number of weeks in the projection year to the previous year’s number of weeks, multiplied by the ratio of the average weekly benefits in the projection year to the previous year’s average weekly benefits.

Where:

• SB = special benefits;
• EE = employees;
• W = number of weeks in a year; and
• AWB = average weekly benefits.

The 2022 experience is adjusted based on known data up to June 2022 while the year 2023 is adjusted as to match the expected benefits projected from year 2019, the latest year of known actual Special benefits not affected by the COVID-19 pandemic. The following adjustments were made:

Benefit TypeAverage Weekly Benefits
2022
Average Weekly Benefits
2023
Number of Weeks
2022
Number of Weeks
2023
Maternity and Parental(2.63%)(2.33%)- nil7%
Sickness(3.50%) (1.11%) (20%)20%
Compassionate(3.98%) (3.12%) (15%)25%
Family Caregiver Adult(3.20%) (1.00%) (15%)- nil
Family Caregiver Children(2.90%)(1.14%)(15%)10%

For projection purposes, expenditures attributed to recent measures and changes to the program are excluded from the base year before growth factors are applied. Expenditures attributed to recent program changes are subsequently added separately to obtain the total special benefits.

##### Self-employed

Starting 31 January 2010, self-employed persons can enter into a voluntary agreement with the Commission through Service Canada to participate in the EI program.

Self-employed benefits are forecasted to increase in line with covered earnings, that is, in line with the self-employed covered population and related insured earnings growth. Projections consider that self-employed persons must wait 12 months after registration to claim EI special benefits.

It is expected that in 2023, self-employed participants enrolling in the EI Program will receive \$20.1 million in MP benefits, \$2.0 million in sickness benefits, \$44 thousand in compassionate care benefits and \$60 thousand in Family Caregiver benefits.

 Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 4,225 4,672 5,098 5,384 5,562 5,737 5,911 6,089 6,327 2,119 1,858 2,302 2,431 2,512 2,591 2,669 2,750 2,857 51 48 60 63 66 68 70 72 75 109 102 110 116 120 123 127 131 136 6,505 6,680 7,569 7,994 8,258 8,518 8,776 9,042 9,394 14,764 17,727 20,094 21,596 22,968 24,476 26,029 27,556 29,383 1,449 1,740 1,972 2,120 2,254 2,402 2,555 2,705 2,884 32 39 44 48 51 54 57 61 65 44 53 60 65 69 73 78 83 88 16,290 19,559 22,170 23,828 25,341 27,006 28,719 30,403 32,420 - nil 80 581 795 841 890 942 997 1,054 730 165 - nil - nil - nil - nil - nil - nil - nil 588 143 - nil - nil - nil - nil - nil - nil - nil 118 - nil - nil - nil - nil - nil - nil - nil - nil 5 20 0 - nil - nil - nil - nil - nil - nil 23 211 47 0 - nil - nil - nil - nil - nil 5,057 5,121 5,163 5,406 5,585 5,761 5,937 6,117 6,356 2,737 2,042 2,887 3,228 3,355 3,483 3,614 3,749 3,914 60 50 60 64 66 68 70 72 75 130 107 110 116 120 123 127 131 136 7,985 7,319 8,220 8,813 9,125 9,436 9,747 10,069 10,481 Table 54 Footnotes Table 54 footnote *ESDC provided total estimates for all special benefits. They were split by type of benefits based on 2021 actual expenses and an analysis of individual claims data.

#### D.3.9. Benefit Repayments

If a claimant’s income for a tax year exceeds 1.25 times the annual MIE, the claimant may be required to repay a portion of EI regular or fishing benefits received. Benefit repayments, as reported in the EI Operating Account, include an estimate for the current tax year, based on regular and fishing benefit payments, and a reconciliation between actual and estimated benefit repayments for the previous tax year.

The current year forecast for 2022 is based on data provided by ESDC and is projected for 2023 and after based on the expected increase/decrease in regular and fishing benefits. The estimate for the forecast 2022 prior year actual is based on the first 6 months of benefit repayments provided by ESDC and the historical average completion ratio after 6 months.

The ratio of repayments to benefit payments is expected to be lower in 2021, as a lower share of beneficiaries will exceed 1.25 times the annual MIE during the COVID-19 pandemic. Starting in 2022, the repayment experience is expected to revert back to normal.

 Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 437 393 345 378 399 410 424 436 453 258 433 393 345 378 399 410 424 436 (265) (437) (393) (345) (378) (399) (410) (424) (436) (7) (4) - nil - nil - nil - nil - nil - nil - nil (2) (8) (8) (8) (8) (8) (8) (8) (8) 428 380 337 370 391 402 416 428 445

#### D.3.10. EI Part II Benefits

The programs delivered under Part II of the EI Act are called Employment Benefits and Support Measures (EBSM). The expected annual estimates for EBSM are provided by ESDC on a fiscal year basis.

Amounts presented in Table 56 include a remaining additional LMDA expense of \$0.85 billion for calendar years 2021 and 2022 (based on an original five-year expense of \$1.8 billion that started in 2018, as announced in Budget 2017).

Actual Forecast 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2021-22 2,531 2,532 2,107 2,107 2,107 2,107 2,107 2,107 2,107 2,490 2,552 2,107 2,107 2,107 2,107 2,107 2,107 2,107

As with Part II benefits, the expected annual estimates for EI administration costs are provided by ESDC on a fiscal year basis. The calendar year costs shown in Table 57 are based on 25% of the current fiscal year and 75% of the next fiscal year.

Actual Forecast 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2021-22 2,640 2,569 2,042 1,909 1,896 1,892 1,892 1,892 1,892 2,525 2,575 2,186 1,942 1,899 1,893 1,892 1,892 1,892 Table 57 Footnotes Table 57 footnote *Administration costs related to the new EI Training Support Benefit proposed in Budget 2019 and expected to launch in 2023 are included.Table 57 footnote **Calendar year slightly different than the calculated value using 75%/25% of fiscal years due to a timing in the administration cost for the new EI Training Support Benefit of \$15.85 million in fiscal year 2022-2023 being fully accounted for in calendar year 2023.

As mentioned previously, the calculation of the reduction related to the EI program’s savings due to the Québec Parental Insurance Plan includes variable administrative costs (VAC). The VAC represent direct operating costs incurred by the EI program associated with the administration of MP benefits outside Québec.

These costs represent the savings to the EI program if it ceased to provide EI MP benefits. The responsibility of determining the VAC each year lies with ESDC. It should be noted that under the Canada-Québec Final Agreement, the Government of Canada provided assurance that the VAC multiplied by the ratio of the insurable earnings in Québec to the insurable earnings outside Québec would not be less than \$5 million. The 2022 to 2029 VAC are projected from actual costs incurred in 2021 as a constant percentage of MP benefits. When applicable, VAC are increased to reflect the minimum under the Canada-Québec Final Agreement.

 Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 24.0 24.3 24.5 25.6 26.5 27.3 28.2 29.0 30.1

Bad debt expenses relate to overpayments and penalties owed and are equal to the amount written off during the year and the change in the annual allowance for doubtful debts. The allowance is calculated on the outstanding balance in the accounts at the end of the fiscal year and is based on the collection policy, the age of the accounts and the amounts written off.

The calendar year bad debt expense included in the closing balance of the EI Operating Account as of 31 December 2021 was equal to 25% of the 2020-2021 expense and 75% of the 2021-2022 expense.

The allowance for doubtful accounts is projected based on historical experience as well as projected Part I benefits. The write-offs projection starting in 2022-2023 is based on the 2019‑2020 experience.

The bad debt expense for a given year corresponds to the difference between the allowance calculated for the year and the net allowance of the previous year (i.e., allowance at the end of the previous year reduced by the write-offs that occurred during the year).

 Actual Forecast 2022‑23 2023‑24 2024‑25 2025‑26 2026‑27 2027‑28 2028‑29 2021‑22 495 491 487 491 497 505 515 526 539 529 495 491 487 491 497 505 515 526 (30) (82) (82) (81) (81) (83) (84) (85) (87) 499 413 410 407 409 415 421 429 439 (4) 78 78 84 88 91 93 96 100 43 58 78 83 87 90 93 96 99

#### D.3.13. Penalties

The Commission may impose a penalty on a claimant, any person acting on behalf of a claimant or an employer under sections 38 and 39 of the EI Act should it become aware that they knowingly provided false or misleading information.

Penalties are correlated with benefit overpayments and are forecasted from year 2019, the latest year before the impact of the COVID-19 pandemic, using the expected annual change in Part I benefits.

 Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 7 73 70 77 80 83 86 88 92

#### D.3.14. Interest

Interest is charged on outstanding EI debts caused through misrepresentation. This includes overpayments and penalties. As per the Interest and Administrative Charges Regulations, the rate of interest charged to EI claimants, employers or third parties on outstanding debts is equal to 3% above the average Bank of Canada discount rate (overnight rate plus 0.25%) from the previous monthFootnote 14.

The overnight rate increased throughout 2022, from 0.25% in February 2022 to its current value of 2.50% in July 2022. The corresponding discount rate (Bank Rate) starting in July 2022 is 2.75% (2.50% + 0.25%). The 3-month T‑Bill forecast from the June 2022 Department of Finance private sector survey was considered in determining the projection of the overnight rate from 2022 (August to December) to 2025. Starting in 2025, the overnight rate is expected to stabilize at 2.25% with a corresponding discount rate of 2.50%. Hence, the projected rate of interest charged on overdue accounts is equal to 5.50% (2.50% + 3.00%) from 2025 to 2029.

As the interest earned is correlated with the amount of outstanding benefit overpayments, it is forecasted using the expected annual change in Part I benefits and the 12-month average of the interest rate. Expected interest for 2022 is based on interest in 2021, increased for changes in Part I benefits and average interest rate from 2021 to 2022.

 Actual Forecast 2022 2023 2024 2025 2026 2027 2028 2021 3.50% 4.75% 6.13% 5.75% 5.50% 5.50% 5.50% 5.50% 5.50% 17 12 15 16 16 16 17 17 18

## Appendix E - Reduction in Employer Premiums Due to Qualified Wage-Loss Plans

This appendix describes the data, methodology and assumptions that underlie the calculation of the 2023 reduction in employer premiums due to qualified wage‑loss plans included in this report. Data and assumptions were updated to reflect the most recent experience, but the methodology used is the same as in the previous actuarial report.

### E.1. Background and Legislation on the Premium Reduction Program

Under subsection 69(1) of the Employment Insurance Act (“EI Act”), the Commission shall, with the approval of the Governor in Council, make regulations to provide a system for reducing employer premiums when employees are covered by a qualified wage-loss plan which reduces EI special benefits otherwise payable, provided that at least 5/12 of the reduction is passed on to employees.

Under subsection 69(3) of the EI Act, the Commission makes regulations for the operation of a premium reduction system, including the method for determining the amount of reduction, the use of actuarial calculations and estimates, and the specific details related to the administration of the program such as minimum qualification criteria and other registration conditions.

The Premium Reduction Program (PRP) was introduced in 1971 at the same time that sickness benefits were introduced to the Unemployment Insurance Program. At the time, many workers were already covered against loss of wages due to illness through employer sponsored plans. It was recognized that the introduction of EI sickness benefits could cause a duplication of costs to both employers and employees. As stated in the 1970 White Paper on Unemployment Insurance, cost concerns and a desire to recognize the role of existing wage-loss plans contributed to the decision to supplement rather than pre-empt those plans. With the exception of benefits paid from registered Supplemental Unemployment Benefit (SUBFootnote 15) plans, it was therefore decided that benefits payable from employer sponsored wage-loss plans would be deducted from EI sickness benefits. In other words, the EI program would adopt a second payer position relative to employer sponsored wage-loss plans that are not registered SUB plans. This implies that employees who become ill and who are not covered by a registered SUB plan first make use of their employer’s plan and only make use of EI sickness benefits if they have no employer plan, or if they have exhausted the benefits from their employer’s plan.

Employers who have a wage-loss plan that meets specific qualification requirements may apply for a reduction of EI premiums under the PRP. In addition to meeting the qualification requirements, participation in the PRP is conditional upon the employer passing on at least 5/12 of the premium reduction to the employees. For administrative simplicity, the full premium reduction is provided to the employer who is then responsible for returning the employees’ portion of the reduction to them through cash or fringe benefits.

In accordance with sections 63, 64, 65 and 66 of the Employment Insurance Regulations (“EI Regulations”), there are four categories of qualified wage-loss plans, which correspond to the main types of wage-loss plans offered to workers. A summary of each category is shown below:

• Category 1: Cumulative paid sick leave plans that allow for a minimum monthly accumulation of at least one day and for a maximum accumulation of at least 75 days.
• Category 2: Enhanced cumulative paid sick leave plans that allow for a minimum monthly accumulation of at least one day and two thirds and for a maximum accumulation of at least 125 days.
• Category 3: Weekly indemnity plans with a maximum benefit period of at least 15 weeks.
• Category 4: Special weekly indemnity plans provided by certain public and parapublic employers of a province with a maximum benefit period of at least 52 weeks.

For each category, a rate of reduction, expressed as a percentage of insurable earnings, is calculated annually. These rates of reduction are then converted into reduced employer multipliers for each category and applicable premium rate.

The principle in determining the rates of reduction is that the EI program is paying lower sickness benefits due to the presence of qualified wage-loss plans, and that these savings to the EI program should be passed on to the employers who sponsor these plans and their employees. As it would not be practical to do this on an individual employer basis nor even possible to make the calculation for new employers or small firms, the rates of reduction compensate employers (and their employees) for the average rate of EI benefit savings that are generated by qualified plans in each category. Given that EI sickness benefits paid to employees who are covered by a qualified wage-loss plan depend on the category, the savings generated, and therefore the rates of reduction, vary by category.

The methodology to calculate the rates of reduction is prescribed in section 62 of the EI Regulations. Pursuant to this section, the employer’s premium shall be reduced by the percentage by which the first payer cost ratio in respect of all insured persons exceeds the experience cost ratio in respect of insured persons covered by a qualified wage-loss plan of that employer’s category.

Both the first payer cost ratio and the experience cost ratio are based on averages from the three years ending with the second year preceding the year for which the calculation is made. Accordingly, for 2023, the years 2019, 2020 and 2021 are used to calculate the first payer cost ratio and the experience cost ratio. The detailed formula for calculating the rates of reduction is presented in Appendix B of this report.

More information on the first payer cost ratio and the experience cost ratio is presented in the following subsections, as well as the resulting rates of reduction, reduced employer multipliers and estimated amount of premium reduction for 2023.

### E.2. First Payer Cost Ratio

The first payer cost ratio represents the average hypothetical job-attachedFootnote 8 EI sickness benefits that would have been paid if benefits payable under a group sickness or disability wage-loss indemnity plan or paid sick leave plan were disregarded for purposes of determining benefits otherwise payable to persons under the EI Act. It is expressed as a percentage of average insurable earnings for all insured persons. This produces a uniform first payer cost ratio reflecting the national average usage for all EI contributors and is consistent with the fact that EI contributors are charged a uniform premium rate in accordance with the pooling of risk principle.

For the purposes of calculating the 2023 rates of reduction, the first payer cost ratio is equal to the average of the first payer cost for years 2019 to 2021, divided by the average insurable earnings of all insured persons for years 2019 to 2021.

The first payer cost for each year is determined by multiplying the hypothetical number of first payer job-attached EI sickness benefit weeks (namely, those that would have been paid if benefits under a group sickness or disability wage-loss indemnity plan or paid sick leave plan were disregarded for EI benefit purposes) by the average weekly sickness benefits that would apply in such circumstances.

The first payer cost was not revised for previously calculated years (i.e. 2019 and 2020). More information on the 2019 and 2020 first payer cost can be found in previous Actuarial Reports.

#### E.2.1. First Payer Job-Attached EI Sickness Benefit Weeks

The hypothetical number of first payer job-attached EI sickness benefit weeks is equal to the product of the hypothetical number of first payer job-attached EI sickness claims and the average duration in weeks of these claims. The hypothetical number of first payer job-attached EI sickness claims is based on the number of individuals with insurable earnings and on an assumed job-attached EI sickness usage rate. This assumed job-attached EI sickness usage rate depends on a number of factors such as the probability of being sick for more than one week (EI sickness incidence rate), the probability of being eligible and applying for EI benefits and the probability of being job-attached at the time of illness.

Employer and employee-wide data on sickness incidences and their duration are not readily available. The most exhaustive and complete data that are available is through the combination of the EI administrative data file and the Canada Revenue Agency T4 data file. The EI sickness incidence rate is therefore estimated based on an analysis of administrative EI and T4 data. Given that the EI claims data are incomplete for employees covered by a qualified wage-loss plan (i.e., only residual claims are paid from the EI program), the EI sickness usage rate of individuals that are not covered by a qualified wage-loss plan was used as a basis for developing the overall EI sickness incidence rate of the entire insured population.

This overall EI sickness incidence rate is adjusted to reflect the estimated impact on incidence rates of different age, sector of employment and salary profiles between individuals with and without a qualified wage-loss plan. The job‑attached EI sickness usage rate differs by sector of employment and depending on whether or not an individual is covered by a qualified wage-loss plan due to different EI eligibility/benefit application rates and varying degrees of job attachment. Individuals who are covered by a qualified wage-loss plan have more stable full-time employment and are more likely to meet the EI eligibility requirements and be job-attached at the time of the illness. Furthermore, they are more likely to apply for EI benefits given that under the hypothetical first payer scenario, employers sponsoring a qualified wage-loss plan are assumed to adopt a second payer position rather than eliminating sickness coverage altogether.

Based on quantitative and qualitative analysis, assumptions were developed to estimate the job-attached EI sickness usage rate of all insured persons under a hypothetical first payer scenario and the resulting hypothetical number of first payer EI sickness claims. The hypothetical number of first payer job-attached EI sickness benefit weeks is calculated by multiplying the hypothetical number of first payer EI sickness claims by the estimated average duration in weeks. To obtain the average duration of claims, the wage-loss status of individuals was taken into account. This is because employees with a wage-loss plan tend to have stronger labour force attachment and that individuals with strong labour force attachment have slightly longer claim durations based on administrative claims data.

The 2021 hypothetical number of first payer job-attached EI sickness claims is 827,322 and the assumed average duration of these claims is 8.2 weeks. The resulting hypothetical number of first payer job-attached EI sickness benefit weeks for 2021 is 6,785,302.

The hypothetical number of first payer job-attached EI sickness benefit weeks for 2019 and 2020 is 6,195,852 and 4,992,379 respectively. More information is provided in previous Actuarial Reports.

#### E.2.2. Average Weekly Sickness Benefits

The average weekly benefits can be calculated by multiplying the following elements:

• Benefit rate (i.e., 55%);
• Weekly insurable earnings of all EI contributors; and
• Ratio of insurable earnings used to calculate the benefits of claimants to the insurable earnings of all EI contributors (“Ratio”). This Ratio captures the effect of the formula used to determine EI weekly benefits and any structural differences between insurable earnings of contributors and claimants.

The average weekly sickness benefits of individuals that are not covered by a qualified wage-loss plan were analysed and broken down into these separate elements. It was observed that the Ratio for individuals with a strong labour force attachment is significantly lower than the Ratio for all individuals. In addition, the Ratio for individuals with insurable earnings at the maximum insurable earnings is close to 1. Based on this analysis, an assumption was developed for the Ratio that would be applicable under a hypothetical first payer scenario. This Ratio was then applied to the benefit rate and weekly insurable earnings to derive the average weekly sickness benefits under a hypothetical first payer scenario.

The resulting average weekly sickness benefits under a hypothetical first payer scenario is \$534.16 for 2021. The average weekly sickness benefits under a hypothetical first payer scenario for 2019 and 2020 are \$454.02 and \$478.55 respectively, as calculated in previous Actuarial Reports.

#### E.2.3. Resulting First Payer Cost and First Payer Cost Ratio

Based on the foregoing, the first payer cost ratio used for the calculation of the 2023 rates of reduction is 0.4389%. Table 62 shows more details on how this first payer cost ratio is determined.

2019Table 61 footnote * 2020Table 61 footnote * 2021 Average for 2023 Rates of Reduction 6,195,852 4,992,379 6,785,302 N/A 454.02 478.55 534.16 N/A 2,813 2,389 3,624 2,942 660,523 645,338 705,406 670,423 0.4259% 0.3702% 0.5138% 0.4389% Table 62 Footnotes Table 62 footnote * More information on the 2019 and 2020 numbers can be found in previous Actuarial Reports.

### E.3. Experience Cost Ratio

Under certain circumstances, EI sickness benefits are paid to individuals covered by a qualified wage-loss plan. The costs to the EI program of these benefits are deducted from the premium reduction granted through the experience cost ratio, which is subtracted from the first payer cost ratio for purposes of calculating the rates of reduction.

The experience cost ratio, which is different for each category, reflects the actual average job-attached EI sickness benefits paid for each category. It is expressed as a percentage of average insurable earnings for the insured persons in that category. In accordance with the EI Regulations, EI sickness benefits paid to individuals who were not job-attached at the time of the claim are not included in the experience cost ratio.

The allocations of annual job-attached EI sickness benefits paid and of insurable earnings among each category are based on an analysis of administrative data and reports provided by Service Canada and ESDC. For 2019, 2020 and 2021, the total cost of job-attached EI sickness benefits for each category is shown in Table 63, and the insurable earnings for each category are shown in Table 64; the amounts shown for 2021 are based on available data.

2019 2020 2021 Average for 2023 Rates of Reduction 101,420,377 75,684,132 127,531,131 101,545,213 12,847,740 8,497,202 15,254,977 12,199,973 105,041,667 82,884,473 130,653,354 106,193,165 3,485,271 2,405,472 5,332,821 3,741,188 222,795,054 169,471,279 278,772,283 223,679,539
2019 2020 2021 Average for 2023 Rates of Reduction 51,191 49,497 57,081 52,590 25,496 24,587 26,812 25,632 200,205 193,537 215,976 203,239 23,779 23,297 27,658 24,911 300,670 290,918 327,527 306,372

The experience cost ratio used in the calculation of the 2023 rates of reduction for each category is shown in Table 65.

Average EI Sickness Costs (\$) Average Insurable Earnings (\$ million) Experience Cost Ratio (A) (B) (A/B) 101,545,213 52,590 0.1931% 12,199,973 25,632 0.0476% 106,193,165 203,239 0.0523% 3,741,188 24,911 0.0150%

### E.4. Rates of Reduction

Pursuant to section 62 of the EI Regulations and section 68 of the EI Act, the employer’s premium shall be reduced by the percentage by which the first payer cost ratio in respect of all insured persons exceeds the experience cost ratio in respect of insured persons covered by a qualified wage-loss plan of that employer’s category. The premium reduction is therefore granted by reducing the employer multiple below 1.4 to a value rounded to 3 decimals.

Table 66 shows the 2023 rates of reduction for each category of qualified wage-loss plan, along with the corresponding reduced employer multiplier for out-of-Québec and Québec employers. The employer multipliers presented in the table are calculated with a premium rate of 1.63% for residents of all provinces except Québec. The corresponding premium rate that would apply to residents of Québec is 1.27%. Pursuant to section 62 of the EI Regulations and section 68 of the EI Act, the employer multiplier is calculated from the unrounded rates of reduction and the rounded rates of reduction are shown for illustration purposes only.

First Payer Cost Ratio Experience Cost Ratio Unrounded Rate of Reduction Rounded Rate of Reduction Employer Multiplier Employer Multiplier (Out-of-Québec) (Québec) 0.4389% 0.1931% 0.2458% 0.25% 1.249 1.206 0.4389% 0.0476% 0.3913% 0.39% 1.160 1.092 0.4389% 0.0523% 0.3866% 0.39% 1.163 1.096 0.4389% 0.0150% 0.4238% 0.42% 1.140 1.066

The Commission will notify each registered employer of the applicable 2023 rate of reduction and employer multiplier. Pro-rated rates apply for plans that do not qualify for a reduction for the full twelve months in the calendar year. In addition, adjusted rates may apply for employers who deduct QPIP premiums for a portion but not all of their employees.

### E.5. Amount of Premium Reduction

Table 67 shows the estimated amount of premium reduction to be granted in 2023. The estimates are based on the historical distribution of insurable earnings by category, which was derived from Canada Revenue Agency T4 data.

Estimated Number of Qualified Employers 2023 Insurable Earnings Rates of Reduction Premium Reduction (\$ million) (\$ million) 2,300 64,102 0.2458% 158 600 30,127 0.3913% 118 23,900 242,634 0.3866% 938 200 31,058 0.4238% 132 27,000 367,921 N/A 1,345

## Appendix F - Acknowledgements

We would like to thank the staff at Employment and Social Development Canada, Canada Revenue Agency, Finance Canada and Service Canada who provided the relevant data used in this report. Without their useful assistance, we would not have been able to produce this report.

The following people assisted in the preparation of this report:

Yu Cheng, ASA
Alice Chiu, ACIA, ASA
Pascale Jomphe, ACIA, ASA
Luc Léger, ACIA, ASA
Kelly Moore

## Footnotes

Footnote 1

Shown in Table 9 of the main report for information purposes.

Footnote 2

The Commission is responsible for setting the premium rate. It may set a premium rate that is different than the one shown in this report. More information on the rate setting process along with the inherent deadlines can be found in Appendix A.

Footnote 3

Year 2019 is the last year of EI Part I benefits paid before the pandemic.

Footnote 4

The number of earners is derived from the T4 data provided by CRA.

Footnote 5

The number of employees is based on the latest Statistics Canada Labour Force Survey.

Footnote 6

Footnote 7

The corresponding unrounded premium reductions are presented in Table 13.

Footnote 8

A sickness claim is considered job-attached if the interruption of earnings with the employer was by reason of illness, injury or quarantine.

Footnote 9

The AWE series has been revised by Statistics Canada since the 2022 Actuarial Report.

Footnote 10
$\mathrm{52}×{\mathrm{AWE}}_{\mathrm{2006}}×\frac{{\mathrm{AWE}}_{\mathrm{2006}}}{{\mathrm{AWE}}_{\mathrm{2005}}}=\mathrm{52}×\mathrm{743.5792}×\frac{\mathrm{743.5792}}{\mathrm{717.4750}}$
Footnote 11

The number of unemployed individuals with an invalid job separation is obtained by multiplying the number of unemployed individuals by the percentage of unemployed with an invalid job separation. For years 2019 and before, this percentage is determined using the EI Monitoring and Assessment report, which is based on Statistics Canada’s EI Coverage Survey. Starting from year 2020, this percentage is determined using Statistics Canada Table 14-10-0125-01 (Reason for leaving job during previous year, monthly, unadjusted for seasonality). Invalid job separations include: voluntarily leaving employment without just cause or to go to school; being dismissed for misconduct; or being unemployed because of a direct participation in a labour dispute.

Footnote 12

The estimated recipiency rates for 2020 and 2021 decrease to 43.5% and 95.3% respectively when emergency or temporary measures are excluded.

Footnote 13

The projected recipiency rates, for 2022 and after, excludes extra beneficiaries due to the temporary measures. People having benefited from these measures are not considered in the projected recipiency rate since they were accounted for separately as recipients of these measures (provided by ESDC).

Footnote 14

Interest rates can be found at Previous payment on due date interest rates.

Footnote 15

A SUB is a supplemental payment to an employee who is receiving EI benefits during a period of unemployment due to temporary stoppage of work, training, illness, injury or quarantine. These payments are made according to the terms of a SUB plan financed by the employer. Payments from a registered SUB plan that meets the requirements of section 37 of the Employment Insurance Regulations are not deducted from the employee’s EI benefits.