The need for a revised approach to the financing of the EI system
OTTAWA, Sept. 13 /CNW/ - The Canadian Institute of Actuaries (CIA) renewed its call for a revised approach to the financing of Canada's Employment Insurance (EI) system, in light of the recent announcement that the two-year freeze on EI premiums is about to be lifted.
"In the past, we have cautioned that the current system of funding would cause EI premiums to be raised at the worst possible moment, namely during an economic downturn or when recovery is still tentative. That is exactly what is happening now," said Micheline Dionne, President of the Canadian Institute of Actuaries.
The CIA has consistently supported a funding mechanism whereby a specific reserve would be set aside for EI purposes. This reserve would be a separate fund, operated at arm's length, and walled off from the rest of the federal government's general funds. A truly independent EI Board would be responsible for the management of this fund and to maintain stable premium rates during the ups and downs of a business cycle.
When first proposed at the end of 2007, the CIA estimated that a $15 billion fund would be sufficient for these purposes. Given that $54 billion was already earmarked for EI within the government's general account, it would have been possible to establish this fund at that time. Before the economy went into recession, the reserve grew to $57 billion but, in 2010, legislation was passed to cancel the earmark, on the grounds that the funds had already been spent for other purposes. At the same time, a new EI fund was launched and charged with a deficit that will soon reach $10 billion.
"Had the government followed our advice, the need to raise EI premiums at this juncture could have been avoided," Ms. Dionne added. "However, it is not too late to take corrective action. We call on the government to revisit this decision, review the allocation of funds in their general account, and establish a sound approach to the funding of this program."
The Canadian Institute of Actuaries is the national organization of the actuarial profession. Member driven, the Institute is dedicated to serving the public through the provision, by the profession, of actuarial services and advice of the highest quality. In fact, the Institute holds the duty of the profession to the public above the needs of the profession and its members.
Actuaries employ their specialized knowledge of the mathematics of finance, statistics and risk theory on problems faced by pension plans, government regulators, financial institutions, insurance companies (both Life and Property/Casualty), social programs and individuals.
For further information:
Josée Racette, Project Manager, Public Affairs
613-236-8196, ext.107
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