The Canadian Institute of Actuaries has released a report calling on Ottawa to stop treating billions of dollars in Employment Insurance premiums as found money. The institute, a self-regulatory and advocacy group for actuaries across the country, urged the federal government to turn over administration of EI—a program whose surplus has ballooned to a massive $54 billion—to an autonomous agency similar to the Canada Pension Plan.
“The current system simply isn’t working,” says Michel BÃ©dard, one of the report’s authors. The report contends that the current process for setting EI premiums is confusing and lacks transparency and credibility. As well, it argues that running the system on a single-year basis leaves little room to correct past or current overcharges in premiums, or to respond to an economic slowdown or recession.
BÃ©dard said Ottawa should create an arm’s-length agency empowered to set premiums. He recommended it have wider representation from employer and employee groups than the current EI Commission, plus an actuarial nominee. And he said a reserve of $15 billion would be more appropriate than the current $54 billion.
SMEs have long complained about having to pay EI premiums far higher than what’s needed to fund the program. When the Canadian Federation of Independent Business recently surveyed its members about taxation, 63% said payroll taxes such as EI had the most adverse effect of all taxes on the growth of their business.
CFIB executive director Garth Whyte called the actuaries’ proposal “on the right track.” His organization is lobbying Ottawa to reduce employer EI premiums at twice the current pace, decreasing them this year by 21¢ for every $100 of insurable earnings instead of 10¢. It’s also calling for a change in the funding formula under which employers pay 60% of the premiums and employees pay 40%. The CFIB proposes two alternatives: a 50-50 split; or a return to the original formula of 40% from employers, 40% from employees and 20% from the government. It argues that Ottawa should chip in to cover a share of the much-expanded “non-core” benefits funded by EI, such as maternity, parental, sickness and compassionate-care leave.
The government promised to review the actuaries’ report. It has also signaled its readiness to reform the EI system—something the ChrÃ©tien and Martin governments resisted. In October’s Throne Speech, for instance, the Harper government promised “measures to improve the governance and management of the Employment Insurance account.”