EI premiums and short-term disability
Many employers in Ontario don’t realize that if they offer a short-term disability plan, they could be eligible for a rate reduction on their Employment Insurance (EI) premium known as the EI Premium Reduction Program.
The amount of the reduction varies depending on the type of plan, with four different “categories” of plans, as set out by the Employment Insurance Act and Regulations:
- Category 1 is a cumulative paid sick leave plan that allows for a minimum monthly accumulation of one day and total maximum accumulation of at least 75 days;
- Category 2 is for a cumulative paid sick leave plan that allows for a minimum monthly accumulation of 1 2/3 days and a total maximum accumulation of at least 125 days;
- Category 3 is for a weekly indemnity plan with a maximum benefit period of at least 15 weeks; and
- Category 4 is for a weekly indemnity plan with a maximum benefit period of at least 52 weeks. Note that this last category is only available to public provincial employers.
Each of these categories has a different rate reduction, updated annually.
In order for an employer to meet the criteria of the premium reduction program, it must offer a short-term disability plan that:
- provides a least 15 weeks of benefits;
- matches or exceeds the level of benefits provided under EI;
- pays benefits within 14 days of a disability;
- allows employees covered by the plan to claim benefits after an eligibility period of three months or less; and
- provides 24-hour-per-day coverage.
The Premium Rate Reduction Program can seem quite complex, with the different allowances for different categories and the requirements of the short-term disability program. For the full rules and explanations and for more information, visit the Service Canada website at www.servicecanada.gc.ca.