Annex 1

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Requirements for short-term disability plans

In order to be considered for an EI premium reduction, your short-term disability plan must meet certain requirements.

The following pages describe the requirements that apply to all short-term disability plans, as well as specific requirements that are unique to weekly indemnity plans and to cumulative paid sick leave plans.

A. Requirements that apply to all short-term disability plans

1. Employees must be eligible to claim benefits under the plan within three months

A new employee who belongs to a group of employees covered by the plan must be eligible to claim benefits on the first day of the month following the completion of three months of continuous employment.

Example: A new employee hired May 10, 2011, is entitled to claim benefits starting September 1, 2011.

Some plans are based on an "hour bank principle," where employees bank hours while working for a number of employers. In this case, a union hiring hall usually administers the employees' pay and benefits. These employees must become eligible to claim benefits on the first day of the month following the day the employee accumulated 400 hours of active employment.

2. The waiting period for payment of benefits cannot be more than 14 consecutive days

Benefits under the short-term disability plan must be paid no later than the 15th day following the start of the employee's disability.

3. Benefits paid must be at least equal to the amount of benefits an employee would receive from the EI program

The weekly amount of benefits payable to employees under the plan must be at least equal to or exceed the amount of EI benefits that the EI program would pay.

For example, the basic EI benefit rate is 55% of a claimant's average insurable earnings, up to a yearly maximum insurable amount of $44,200 in 2011. This means that claimants can receive a maximum payment of $468 in EI benefits per week. Therefore, for 2011, the short-term disability plan must provide at least 55% of an employee's normal weekly insurable earnings, to a maximum of at least $468.

Please note the following:

When calculating insurable earnings, employers must include any additional income the employee earned for work done on a regular basis, such as overtime, bonuses, and shift differentials.

The yearly maximum insurable earnings amount is reviewed each year. If an adjustment is made, it affects the maximum payment of EI benefits a person can receive. Therefore, if your plan provides a fixed maximum weekly amount of benefits that is equivalent to that offered by the EI program, your amount must be adjusted on or before January 15 of the year following the adjustment. This adjustment will ensure that the amount is still equal to or exceeds the amount of EI benefits an employee would receive from the EI program.

Example

On January 1, 2010, your short-term disability plan specified that the maximum amount of benefits payable per week was $457, which was the same maximum payable under the EI program.

On November 12, 2010, the EI program announced an increase of the maximum insurable earnings amount effective January 1, 2011 (from $43,200 to $44,200). As a result, the maximum weekly amount of EI benefits payable to claimants increased from $457 to $468.

To continue with your EI premium reduction, you will have to increase your amount of benefits payable to $468 per week on or before January 15, 2011. If you do not modify the amount, your plan will no longer meet the requirements to qualify for an EI premium reduction.

To avoid having to modify your plan every time the EI maximum insurable earnings amount is adjusted, you may choose to include a clause in your plan that will automatically upgrade the maximum benefit level to match any such increases in the EI yearly maximum insurable earnings amount.

4. The plan must be the first payer

The plan cannot allow an employee to claim EI benefits as part of its payment structure (that is, benefits under the plan cannot be integrated or coordinated with benefits that are paid under the Employment Insurance Act).

5. The plan must provide 24-hour coverage

The employees must be covered whether they are at work or not, even if they are injured while working at a second job. The plan must protect employees in both "occupational" and "non-occupational" environments, except in situations described in Item 6 below.

6. The plan can have certain limitations to the payment of benefits

Some limitations to the payment of benefits are allowed that will not prevent the employer from qualifying for an EI premium reduction.

It is acceptable that benefits are not paid to an employee:

  • who is not under the care of a licensed physician;
  • whose illness or injury is covered by workers' compensation, the Canada Pension  Plan, or the Quebec Pension Plan;
  • whose illness or injury is intentionally self-inflicted;
  • whose illness or injury results from service in the armed forces;
  • whose illness or injury results from war or participation in a riot or a disturbance of the public order;
  • whose illness or injury occurs while on leave of absence or paid vacation;
  • who is receiving maternity, parental, or compassionate care benefits under the Employment Insurance Act;
  • who is ill or injured as a result of committing a criminal offence;
  • who is engaged in employment for wage or profit while receiving disability benefits;
  • who is ill or injured during a strike or lockout at the place of employment (if the right to benefits is reinstated on the employee's return to active employment);
  • who is serving a prison sentence;
  • who is not entitled to EI income benefits payable because he or she is outside Canada;
  • whose illness results from the use of drugs or alcohol and who is not receiving continuing treatment for the use of these substances;
  • who receives accident benefits under a provincial automobile insurance plan that does not take EI income benefits payable into account when paying their benefits;
  • who receives a retirement pension from the same employer;
  • who has plastic surgery solely for cosmetic purposes, except where attributable to illness or injury; or
  • who, in the case of a recurring disability, is receiving benefits according to a reinstatement provision of a group long-term disability plan (as long as the reinstatement period does not exceed six months).

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