The operations of the Commission and the funds under its management must be fully accounted for and reported in accordance with generally accepted public sector accounting standards. The Commission should have the authority to make recommendations to the government. While the Act indicates that all EI revenues and expenditures are to be transacted through the Consolidated Revenue Fund CRF , sections 73 to 78 specifically state that these amounts are to be respectively credited and charged to the EI Account.
Therefore, the EI Account is essentially a consolidated accounting entity that tracks EI-related financial transactions. The converse is true when EI expenditures exceed revenues. The year-end balance in the EI Account is also tracked over time and this is represented by the cumulative balance, a notional amount that, according to many, is borrowed from the EI Account in the case of a surplus or owed to the CRF in the case of a deficit.
This view is further supported by section 76 of the Act, which authorizes the Minister of Finance to pay interest on the cumulative balance in the EI Account in accordance with such terms and conditions and at such rates as are established by the Minister. It is important to note that section 77 of the Employment Insurance Act limits the government in terms of what can be charged to the EI Account and, in this regard, expenditures outside the purview of EI may not be used to reduce the cumulative balance in the EI Account.
In other words, this cumulative balance cannot be wiped out by paying money out of the CRF to finance health care, defence or any other non-EI related use.
Thus, I have concluded that the government has not observed the intent of the Employment Insurance Act. Sheila Fraser, Auditor General of Canada 7. The extra premium revenue collected since has not been paid out, not into a reserve account and not into the unemployment insurance account. They went directly into the government coffers.
Hassan Yussef, Canadian Labour Congress 8. With respect to the accumulated surplus, for a number of years now, many groups and organizations, including our own, have loudly denounced the use of employment insurance surpluses for purposes other than those of the system. We believe a broad debate on this question is necessary. Even though those billions of dollars have already been spent, this way of doing things was highly debatable.
We therefore think it is imperative, to say the least, that consideration be given to the possibility of reallocating those amounts to the employment insurance account, from which they should never have been withdrawn. As regards the use of the accumulated surplus, there is no doubt in our view that the money must be returned to the people who contributed. The only thing is that, in the event of a public debate in which the question would be whether this money should be strictly handed over to unemployed workers, at the cost of reducing the government's fiscal flexibility for all programs and spending, our priority would clearly be to hand it over to workers on the one hand.
Prior to the implementation of the Employment Insurance Act in , the cumulative balance in the EI Account was always moving toward a break-even level, a function of the premium rate-setting process at that time. This rate-setting process was repealed under the Employment Insurance Act , a subject that is further discussed in the next section of our report.
Not surprisingly, the origin of this unprecedented cumulative balance in the EI Account was a point of discussion throughout our hearings. Many regard the cumulative balance in the EI Account as a product of numerous changes restricting access to EI since the beginning of the s. There is no doubt that the EI reform in resulted in a smaller program. Changes to EI since have generally contributed to a slightly more generous and accessible program; but despite increased spending on these measures, the cumulative balance in the EI Account has continued to grow.
Insofar as more recent years go … each and every change has had the impact of extending eligibility or benefits to deal with particular issues on which we felt that improvements to the program were warranted. So those are a matter of record and they are policy decisions, policy choices, and they do entail costs in addition to what there would have been had there been no change.
Departmental officials cited unanticipated strength in the Canadian economy, and its impact on employment growth, as the primary reason for the burgeoning cumulative balance in the EI Account. In other words, like the Auditor General and many of our witnesses, we find it difficult to accept that EI premium rates were being set exclusively within the parameters of the Act.
The vast majority of those who appeared before the Subcommittee maintained that the cumulative balance in the EI Account belonged to the EI program and that the government should begin to use the CRF to reduce the cumulative balance in this Account. A few witnesses seemed to be willing to let bygones be bygones, simply in recognition of the fact that other policy objectives would have to compete with the repatriation of EI funds.
This necessarily requires that the cumulative surplus in the EI Account be returned to the EI program. In my view, the cash surplus in the employment insurance fund absolutely must not disappear, absolutely not.
There is no doubt that for many years the government has been charging employers and employees far more than is necessary to pay the costs of EI benefits … Whether or not you agree with the way that money was spent it has been spent and we can no more undo the excessive EI premiums charged in the past than we can retroactively reverse the lower tax rates that Canadians enjoyed or reverse the transfers that have already been made to provinces for health care over the same period.
Among the overwhelming majority of witnesses who maintained that the cumulative balance in the EI Account should be returned to the EI program, there was a substantial difference of opinion as to how this should be done. Organizations representing employees generally expressed the view that most, if not all, of the cumulative balance in the EI Account should be used to enhance benefits and coverage under the EI program.
Organizations representing employers generally favoured a continued reduction in the premium rate as well as changes to other financing-related measures. Committee members also find themselves with differing views regarding how the repatriated surplus should be used.
In our opinion, the first step in resolving this matter is to immediately halt the growth in the cumulative balance in the EI Account. We recognize that there are large fiscal implications associated with the repatriation of the EI surplus. We also recognize that premium payers, as well as taxpayers in general, have benefited from spending related to year-end surpluses in the EI Account via spending on other priorities such as health care, increased assistance for higher education, tax relief and debt reduction, to name just a few.
However, it is impossible to determine who benefited and by how much. Finally, and perhaps most important, repatriated surplus EI revenues and EI premiums collected in the future must be managed and used in such a way so that revenues earmarked for EI are spent on EI. We do not think, however, that an entity like this would be satisfactory, because we believe, as indicated earlier, that EI should continue to be controlled by the federal government. In her appearance before the Subcommittee, the Auditor General of Canada clearly expressed the view that if the federal government continued to have control over EI, then EI should be included in the Accounts of Canada.
We want to ensure that this is the case as well. Of course all premiums are currently deposited to the consolidated revenue account, and all payments come from that same account. So there are two factors: revenue and expenditure accounting and the use of cash on hand. Cash on hand is in a bank account and can be used for all kinds of purposes. Sheila Fraser, Auditor General of Canada The Committee recommends that, in conjunction with the legislation referred to in Recommendation 1, statutory authority be given to establish a new reserve, called the Employment Insurance Fund Account.
The Employment Insurance Fund Account, perhaps modelled after the Exchange Fund Account, 19 would exist outside of the Consolidated Revenue Fund and act as a depository for all employment insurance premiums and other transfers from the Consolidated Revenue Fund as required by law.
Funds transferred from the Employment Insurance Fund Account to the Consolidated Revenue Fund would by law be used exclusively to cover employment insurance costs. See our article on EI for the self-employed. For maximum insurable amounts, and maximum premiums, see our tables of EI premium rates. Some of the other situations where income is not subject to employment insurance:. There are some types of employment payments and other payments from which EI premiums do not have to be deducted.
It includes information on:. Skip to main content Have you or a family member ever tried to collect Employment Insurance after paying into it for years, only to be denied? Business owners: Insurable or not? Family members: Insurable or not? Complete and submit Request for a Refund form PD Knowing the rules of Deductions at Source DAS for the Canada Pension Plan CPP and Employment Insurance EI is important for small businesses in Toronto and Mississauga because; a errors in payroll remittances to the government can result in hefty penalties and b it is a significant consideration for when deciding to pay out to the owner-manager s salary or dividend.
Contributions to the CPP give the contributor the right to retirement benefits upon reaching retirement age.
These deductions are calculated as such:. Unincorporated self-employed individuals are also subject to CPP.
However, they do not need to remit it to the government on a regular basis. Instead, their CPP contribution will be calculated at year end when filing their personal income taxes and will be payable to the CRA along with the payment of their income tax balance in April.
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