Tag Archives: EI

Best from the Blogosphere: 2018 Federal Budget Edition


What I find most interesting about budgets are the provisions that are often buried in the fine print and don’t make the front page of the newspaper. You will find links below to some widely-reported features of the 2018 Federal Budget and others you may not yet be aware of.

The graphic above illustrates how the new EI parental-sharing benefit will operate. The Investment Executive reports that in an initiative that was widely-anticipated in the lead-up to the February 27th budget, the Liberal government introduced a new Employment Insurance (EI) parental sharing benefit that will provide extended EI parental benefits when both parents agree to share parental leave. The proposed “use-it-or-lose-it” benefit will increase the duration of EI parental leave by up to five weeks for parents who share a standard 12-month parental leave, or up to eight weeks for parents who share an extended 18-month leave. This incentive is expected to be available starting June 2019.

And while details are sketchy, MPs may finally be entitled to long over-due maternity and parental leave. According to the Budget Papers (p.52):

“The Government is supportive of, and will work with Parliament on, the recommendations put forward in the report of the Standing Committee on Procedure and House Affairs entitled Support for Members of Parliament with Young Children. This includes…improving work-life balance, providing access to child care and designated spaces for the use of Members with infants and children, and a change to the Standing Orders of the House of Commons to allow an infant being cared for by a Member of Parliament to be present on the floor of the House of Commons. The Government will also bring forward amendments to the Parliament of Canada Act to make it possible for Parliamentarians to take maternity and parental leave.”

The government has backtracked on key tax measures for small businesses. Mark Burgess at advisor.ca explains how the federal government will tie the passive income threshold to the small business deduction. He notes that the plan put forward in Tuesday’s federal budget takes a different approach to the one the government proposed last summer that received considerable blowback from business owners.

If a corporation earns more than $50,000 of passive investment income in a year, the amount of income eligible for the small business tax rate is reduced and more of the company’s active income is taxed at the general corporate rate. The $50,000 threshold originally announced in changes the government made to its proposals while under pressure from business groups in October is equivalent to $1 million in passive investment assets at a 5% return.

Julie Cazzen at Maclean’s lists 15 ways Budget 2018 will affect your wallet.  Here are a few of the interesting budget provisions she highlights:

  • The Canadian Child Benefit will be indexed to inflation starting July 2018.
  • You will be able to open an RESP and claim the $500 Canada Learning Bond grant at the same time that you apply for a birth certificate for your child. This will automatically enroll children born into low-income families for the grant.
  • Canada Student Grants and Loans has expanded eligibility for part time students, as well as full and part time students with children, and introduced a three-year pilot project that will provide adults returning to school on a full-time basis after several years in the workforce with an additional $1,600 in grant money starting Aug 1, 2018.
  • A new Apprenticeship Incentive Grant for Women will give women in male-dominated trades fields $3,000 per year of training (or up to $6,000 over two years). Almost all Red Seal trades are eligible.
  • The CPP death benefit is now $2,500 for all eligible contributors (whereas before it was pro-rated.)

Rob Carrick in the Globe and Mail discusses seven changes that could affect your finances. For example, following up on public consultations in 2016, the federal government is poised to announce improvements to Canada Deposit Insurance Corp. The consultations looked at adding registered disability savings plans (RDSPs) and registered education savings plans (RESPs) to the list of registered accounts that are covered and adding foreign currency deposits to covered products.

This would benefit snowbirds keeping large deposits in U.S.-dollar accounts. Other reforms could add coverage for guaranteed investment certificates of longer than five-year terms. Increasing the current $100,000 coverage limit for eligible deposits does not appear to be in the government’s plans.

Some other lesser known and unexpected Budget proposals reported by the Financial Post are:

  • The government will create an advisory council to begin “a national dialogue” on a national pharmacare program.
  • The government is moving to provide more support for Canadians suffering from mental health issues – including veterans – by helping them with the cost of psychiatric service dogs. Specifically, starting this year, the Medical Expense Tax Credit will be expanded to cover costs associated with the animals.

The federal government also announced in the budget that it will eventually move away from its problem-plagued Phoenix pay system – which has overpaid, underpaid or completely failed to pay tens of thousands of public servants – and invest $16-million over two years to develop a new pay system.

You can see the full document tabled in the House of Commons here.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Understanding Employment Insurance changes

By Sheryl Smolkin

All employed Canadians and their employers must contribute to the federally-operated Employment Insurance plan. So if you lose your job, three of the first questions you will likely ask are:

  • How much can I expect to receive from EI?
  • How long do I have to wait?
  • For how many weeks can I receive benefits?

Generally in 2016, you get 55% of your previous income, up to a maximum of $537 per week after a two-week waiting period. You can receive EI  for 14 weeks up to a maximum of 45 weeks, depending on the unemployment rate in your region at the time of filing your claim and the amount of insurable hours you have accumulated in the last 52 weeks or since your last claim, whichever is shorter.

However, in the March 2016 budget, the Liberal government announced some key changes  that will make collecting EI a bit easier in some situations. For example:

  1. Eliminating new entrant, re-entrant rules: The Government amended the rules to eliminate the higher EI eligibility requirements that restricted access for new entrants and re-entrants to the labour market. As of July 3, 2016 new entrants to the workforce (think young workers getting their first jobs) or re-entrants (think stay-at-home parents who are going back into the workforce) have been required to work between 420 to 700 hours over the previous 52 weeks to qualify for employment insurance, depending on labour conditions in their area of the country. That’s a reduction from the previous 910 hours.
  2. Two week waiting period reduced to one week: The EI waiting period is a period of time that must be served before a claimant can begin to receive EI benefits.  It has been set at two weeks since 1971. The reduction of the waiting period applies to regular, fishing and special benefits such as sick benefits, maternity and parental benefits. However, the number of weeks of EI benefit entitlement will not change.
  3. New Working While on Claim pilot project: Between August 7, 2016 and August 11, 2018,  EI claimants collecting regular, fishing, compassionate care or benefits for the care of critically-ill children have two options that will allow them to earn some additional income while they are on claim. Under the “default rule,” the claimant keeps 50 cents of EI benefits for every dollar earned in wages, up to a maximum of 90 per cent of his/her previous weekly earnings (or, roughly four and a half days of work).. Above this cap, benefits are reduced dollar-for-dollar. The “default rule” will automatically apply to claims. Otherwise, claimants can choose the “optional rule which allows them to keep the equivalent of up to roughly one day’s work (defined as $75 or 40 per cent of the benefit rate, whichever is greater) without any deduction from their benefits. Any amount earned above the equivalent of roughly one day’s work will be deducted dollar-for-dollar from benefits.
  4. Simplifying job search responsibilities for EI claimants: The Government reversed the 2012 changes to the EI program that strictly defined the job search responsibilities of unemployed workers and forced them to move away from their communities and take lower paying jobs. Nevertheless, long-standing requirements that claimants must search for and accept available work while on EI will continue to be upheld. This change came into effect on July 3, 2016.
  5. Extending EI regular benefits for regions affected by commodities downturn: Dramatic declines in global commodity prices since late 2014 have produced sharp and sustained unemployment shocks in commodity-based regions. In response, through Budget 2016, the Government made temporary legislative changes to extend the duration of EI regular benefits by 5 weeks, up to a maximum of 50 weeks of benefits, for all eligible claimants in the 15 EI economic regions (including Saskatchewan) that have experienced the sharpest and most severe increases in unemployment.

The Government also made legislative changes to offer up to an additional 20 weeks of EI regular benefits to long-tenured workers in the same 15 EI economic regions, up to a maximum of 70 weeks of benefits. These benefits became available for one year, beginning in July 2016, and will apply to anyone who started a claim for regular EI benefits on or after January 4, 2015, and is still unemployed.

To Rent or to Buy: That is the Question

By Sheryl Smolkin

The Canadian dream for many is to find a partner, get married, buy a house and have kids –- not necessarily in that order. With the average house price in June 2015 climbing to $639,000 in Toronto and $922,000 in Vancouver, many young people have been shut out of the housing market.

However, Saskatchewan residents are more fortunate, with the average provincial house price sitting at $303,000 province-wide and $316,000 in Regina. But if you or a family member are thinking about leaving the world of rentals behind and buying your first home, it’s still important to factor in all of the costs you will incur, and the impact possible interest rate increases will have on your monthly payments.

Here are 5 questions you should answer before you decide to leap into the housing market:

  1. How big is your down payment? While it is possible to buy a home with as little as 5% down, if your deposit is less than 20% of the purchase price your mortgage must be insured by a third party such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada or Canada Guaranty. The insurance premium will range from 0.5% and 2.75% of your total mortgage amount and add significantly to the cost of your home over time.
  2. How much house can you afford? Mortgage experts suggest no more than 32% of household income be spent on housing costs. The Mortgage Payment Calculator on ratehub.ca will allow you to model how much your monthly payments will be depending on the amount of your deposit, the term of the mortgage, interest rate and any mortgage insurance. So if you buy a house for $350,000 with 5% down, a 5-year mortgage amortized over 25 years at a fixed rate of 2.69%, your payments will be $1,576/month. In addition, you must factor in municipal taxes, utilities and annual maintenance costs. In contrast, over the past year, rent for a two-bedroom apartment in Regina ranged from $884 to $1,395.
  3. Is your job secure? Taking on a mortgage is a long-term commitment. If you are basing your ability to pay for your home on your current family income, consider whether or not you and your spouse have secure jobs. Could you afford to continue paying monthly house expenses if one of you lost your job? How long would it likely take get a new job if one of you were downsized?
  4. What are your family plans? If the next major milestone after buying a house is to start a family, that means that at least one parent may be out of the workforce for up to a year after the birth of each child. Are one or both of you eligible for EI maternity and parental leave benefits? Do either of your employers top up EI benefits to all or part of your full salary for some period of time? If not, how will you make up the difference? When both of you go back to work, will you be able to afford daycare costs on top of your mortgage payments?
  5. What if interest rates go up? Mortgage rates are at historic lows. According to ratehub.ca if you have a down payment of 20% your mortgage rate (calculated on August 17/15) you may pay as high as 2.69% for a 5-year fixed rate in Regina or as low as 1.85% for a variable rate in the same city. What if interest rates doubled or tripled? Could you still afford your mortgage payments plus all of your other family commitments?

The advantages of renting are that your costs are fixed for the term of the lease; you are not responsible for the cost of major repairs; and, if you want to leave the neighbourhood or move to another city you have much more flexibility.

While you are not purchasing an asset that will increase in value that you can cash in when you are ready to retire, if you save and invest the difference between your annual rent and the costs of running your home, you will have a nice little nest egg by age 65.But few people have the discipline to do so. And most rental properties cannot be customized or decorated to your own personal taste.

So all things considered, the decision to rent or buy may be as much an emotional decision as an economic one. Each individual or family will make a unique decision based on their stage of life, their finances and their personal priorities.

Also read:
Cheap mortgage rates don’t justify home ownership

Why you should join SPP in July

By Sheryl Smolkin

Have you noticed that your most recent pay cheque is higher than usual? That could be because you have paid the maximum in Canada Pension Plan (CPP) and (EI) Employment Insurance Premiums for the year. 

The total amount you must contribute to CPP in 2015 is:

($53,600 [maximum earnings] – $3,500 [basic exemption]) x 4.95% = $2,479.95 

This amount is matched by your employer.

Similarly, the annual Employment Insurance (EI) maximum earnings are $49,500 with an employee contribution rate of 1.88%. Therefore the maximum EI contribution you have to make this year is $930.60. Your employer must remit 1.4 times the maximum premium you pay up to $1,302.84.

These annual maximum CPP and EI contributions apply to each job you hold with different employers. So if you leave one job during the year to start work with another company, your new employer also has to deduct EI premiums without taking into account what was paid by the previous employer. This is the case even if you have paid the maximum premium amount during your previous employment.

Also, if you have several part-time jobs or a part-time job in addition to your full time position, your secondary employer is also obligated to withhold CPP and EI premiums based on your earnings regardless of how much your primary employer is deducting. If as a result, you over- contribute to either program, you will be credited with excess when you file your income tax return for the year.

That means if you earned $50,000 in the first half of the year, by early July your pay will go up by 6.83% or about $131.45 per week. If your annual salary is lower, your “Withholding Tax Freedom Day” will occur a little later in the year. But whenever it kicks in, it will feel like you suddenly got a healthy raise.

So what are you going to do with your windfall? How about joining Saskatchewan Pension Plan (SPP) and setting up a monthly deposit equal to the amount you would have paid to the government?

Depending on your income level, you could easily contribute the $2,500 SPP max in the second half of the year. Beginning January 2016 you could elect to continue contributing at a reduced level throughout the coming year. Or in the alternative, you could take a break until later in 2016 when you have again paid the maximum CPP and EI to start saving again in SPP.

A key feature of SPP is that how much you contribute and when is completely up to you. You can change your method or level of contribution at anytime.

 Choose from any of the following methods:

  • in person or by telebanking at your financial institution
  • by phone using your credit card (1-800-667-7153)
  • directly from your bank account on a pre-authorized contribution schedule (PAC)

Contributions to SPP are permitted up to an annual maximum of $2,500, subject to your  available RRSP room. And because SPP contributions (like contributions to an RRSP) are tax deductible, if you are making regular contributions, you could file a Form T1213 Request to Reduce Tax Deductions at Source so your employer remits a lower amount of income taxes during each pay period.

That means that while you can not only build a retirement nest egg in your SPP account once you no longer have to contribute to the CPP and EI programs, you will actually have more disposable income every month.