Updated on January 29, 2025.
At the end of 2022, the Government of Canada improved the sickness benefits under the Employment Insurance (EI) system. This measure is particularly beneficial for low income workers who have no disability coverage.
However, it’s important to consider how this decision may affect the disability benefits of your group insurance plan.
Let’s take a closer look...
From 15 to 26 Weeks of Sickness Benefits
To deliver financial support to Canadians when they are sick or injured, and to protect their employment should they experience a prolonged recovery, the government extended the duration of EI sickness benefits from 15 to 26 weeks, starting December 18, 2022. If EI approves the applicant’s claim, EI sickness benefits are paid at 55% of the applicant’s average weekly insurable earnings, up to a maximum of $695 per week (amount effective January 1, 2025). This income is taxable.
Should You Align With This New Rule?
Historically, group insurance plans have often been aligned with EI benefits. For example, short-term disability (STD) benefits usually cover the first 16 weeks of sickness (1-week waiting period + 15 weeks of benefits), while long-term disability (LTD) benefits generally begin the 17th week.
With the new EI rules, there is no legal obligation to amend your group insurance plan. However, it may be wise to do so depending on your specific circumstances.
Here are some potential scenarios:
1. Your plan offers long-term disability only
If your plan offers LTD only, there are a few options to consider:
- Maintaining the current plan. Employees on sickness leave could collect up to 26 weeks of EI benefits, then begin receiving LTD benefits after 16 weeks, based on the terms of your plan. This would result in the two plans overlapping from week 17 to week 26. The benefits would need to be coordinated to prevent the employee from receiving benefits exceeding the eligible amount. In general, insurers are the first payers, so employees will need to declare their LTD benefits on their EI application, for adjustment purposes.
- Amending the plan: You could adjust your plan to avoid the overlap. In this case, employees could receive up to 26 weeks of EI benefits. After that, they would be entitled to LTD benefits based on the terms of your plan. This situation could be less advantageous for employees, especially if they collect more than $695 per week (amount in effect on January 1, 2025) under the private plan. It is therefore crucial to think twice before making a hasty decision in this regard, especially in a period of manpower shortages.
- Amending the plan: Add STD. You could decide to add STD benefits to your plan for all your employees. This way, your group insurance plan, instead of EI, would cover the disability period. This option has the advantage of better protecting the financial security of your key employees.
2. Your plan offers both short- and long-term disability
Does your plan already cover short-term and long-term disability (STD and LTD)? The enhancement made by the government will have little impact on your plan, if not for potential overlapping.
- Supplemental Unemployment Benefit (SUB). Some group insurance plans pay the difference between EI benefits and the disability coverage during the first 15 weeks of sickness. In this situation, you have two options:
- Maintaining the current plan. Employees on sickness leave could collect up to 26 weeks of EI benefits. The SUB would be added for the first 15 weeks of benefits. However, at that point, LTD would then kick in based on the terms of your plan, while the EI benefits continue. As a result, the plans would still overlap and the employee would receive an amount exceeding what is provided for in the plan. In general, insurers are the first payers, so employees will need to declare their LTD benefits on their EI application, for adjustment purposes.
- Amending the plan: You could amend your plan to align with the EI changes. This way, employees on sickness leave could collect up to 26 weeks of EI benefits, plus the SUB from your plan (for the first 15 weeks). LTD would only begin the 27th week. This option prevents any overlapping of the plans.
- Maintaining the current plan. Employees on sickness leave could collect up to 26 weeks of EI benefits. The SUB would be added for the first 15 weeks of benefits. However, at that point, LTD would then kick in based on the terms of your plan, while the EI benefits continue. As a result, the plans would still overlap and the employee would receive an amount exceeding what is provided for in the plan. In general, insurers are the first payers, so employees will need to declare their LTD benefits on their EI application, for adjustment purposes.
There are many different types of short- and long-term disability plans. Your specific situation may not have been addressed in this article. In any event, it is best to contact your advisor for more information.
Talk to your advisor!
This is not the first time the Government of Canada has amended the rules governing EI sickness or injury benefits. But this time involves a major change that is disrupting current practices and requires careful thought to ensure that the right decision is made, taking the context into account.
We encourage you to contact your AGA Advisor to review the situation in detail and assess the impact of each option. You can never have too much information!
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Updated on January 29, 2025.
At the end of 2022, the Government of Canada improved the sickness benefits under the Employment Insurance (EI) system. This measure is particularly beneficial for low income workers who have no disability coverage.
However, it’s important to consider how this decision may affect the disability benefits of your group insurance plan.
Let’s take a closer look...
From 15 to 26 Weeks of Sickness Benefits
To deliver financial support to Canadians when they are sick or injured, and to protect their employment should they experience a prolonged recovery, the government extended the duration of EI sickness benefits from 15 to 26 weeks, starting December 18, 2022. If EI approves the applicant’s claim, EI sickness benefits are paid at 55% of the applicant’s average weekly insurable earnings, up to a maximum of $695 per week (amount effective January 1, 2025). This income is taxable.
Should You Align With This New Rule?
Historically, group insurance plans have often been aligned with EI benefits. For example, short-term disability (STD) benefits usually cover the first 16 weeks of sickness (1-week waiting period + 15 weeks of benefits), while long-term disability (LTD) benefits generally begin the 17th week.
With the new EI rules, there is no legal obligation to amend your group insurance plan. However, it may be wise to do so depending on your specific circumstances.
Here are some potential scenarios:
1. Your plan offers long-term disability only
If your plan offers LTD only, there are a few options to consider:
- Maintaining the current plan. Employees on sickness leave could collect up to 26 weeks of EI benefits, then begin receiving LTD benefits after 16 weeks, based on the terms of your plan. This would result in the two plans overlapping from week 17 to week 26. The benefits would need to be coordinated to prevent the employee from receiving benefits exceeding the eligible amount. In general, insurers are the first payers, so employees will need to declare their LTD benefits on their EI application, for adjustment purposes.
- Amending the plan: You could adjust your plan to avoid the overlap. In this case, employees could receive up to 26 weeks of EI benefits. After that, they would be entitled to LTD benefits based on the terms of your plan. This situation could be less advantageous for employees, especially if they collect more than $695 per week (amount in effect on January 1, 2025) under the private plan. It is therefore crucial to think twice before making a hasty decision in this regard, especially in a period of manpower shortages.
- Amending the plan: Add STD. You could decide to add STD benefits to your plan for all your employees. This way, your group insurance plan, instead of EI, would cover the disability period. This option has the advantage of better protecting the financial security of your key employees.
2. Your plan offers both short- and long-term disability
Does your plan already cover short-term and long-term disability (STD and LTD)? The enhancement made by the government will have little impact on your plan, if not for potential overlapping.
- Supplemental Unemployment Benefit (SUB). Some group insurance plans pay the difference between EI benefits and the disability coverage during the first 15 weeks of sickness. In this situation, you have two options:
- Maintaining the current plan. Employees on sickness leave could collect up to 26 weeks of EI benefits. The SUB would be added for the first 15 weeks of benefits. However, at that point, LTD would then kick in based on the terms of your plan, while the EI benefits continue. As a result, the plans would still overlap and the employee would receive an amount exceeding what is provided for in the plan. In general, insurers are the first payers, so employees will need to declare their LTD benefits on their EI application, for adjustment purposes.
- Amending the plan: You could amend your plan to align with the EI changes. This way, employees on sickness leave could collect up to 26 weeks of EI benefits, plus the SUB from your plan (for the first 15 weeks). LTD would only begin the 27th week. This option prevents any overlapping of the plans.
- Maintaining the current plan. Employees on sickness leave could collect up to 26 weeks of EI benefits. The SUB would be added for the first 15 weeks of benefits. However, at that point, LTD would then kick in based on the terms of your plan, while the EI benefits continue. As a result, the plans would still overlap and the employee would receive an amount exceeding what is provided for in the plan. In general, insurers are the first payers, so employees will need to declare their LTD benefits on their EI application, for adjustment purposes.
There are many different types of short- and long-term disability plans. Your specific situation may not have been addressed in this article. In any event, it is best to contact your advisor for more information.
Talk to your advisor!
This is not the first time the Government of Canada has amended the rules governing EI sickness or injury benefits. But this time involves a major change that is disrupting current practices and requires careful thought to ensure that the right decision is made, taking the context into account.
We encourage you to contact your AGA Advisor to review the situation in detail and assess the impact of each option. You can never have too much information!