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Responding to Temporary Interruptions in Business Operations: SUB Plans

Many employers are looking for creative ways to support their operations and their employees through interruptions brought on by the spread of COVID-19. In doing so, it is important not to forget about options already in place to assist businesses facing more typical economic challenges. One such option is Supplemental Unemployment Benefit (SUB) plans offered through the Employment Insurance Act. A SUB Plan allows an employer to top up the EI benefits received by employees when they are not working, without either affecting their entitlement to EI benefits or having the top-up be subject to all the normal deductions of employment income.

SUB Plans

The purpose of a SUB plan is to provide supplemental payments to EI benefits during a period of unemployment due to: temporary stoppage of work; training; illness, injury or quarantine (as well, SUB Plans can also be used for employees taking pregnancy and/or parental leave). These payments are not deducted from the employee’s benefits, nor are they considered insurable earnings under the EI Act (which means EI premiums are not deducted).

SUB plans need to be registered, unless they offer supplements to employees on pregnancy, parental, compassionate care or family caregiver benefits. Registration requires a form, the plan and any other relevant documents (e.g. collective agreement, insurance policy, trust agreement or company policies containing information about the plan, if applicable). As of the date of this blog, the government has not announced any changes to the SUB program to account for unemployment due to COVID-19; however, we understand – anecdotally – that SUB Plans currently being submitted, are being approved with very quick turnaround times, although still only applying to EI benefits (as opposed to specifically recognizing CERB benefits).

The Criteria

The requirements of a valid SUB plan are spelled out in sections 37(2)(a)-(i) of the EI Regulations with additional information available on the government’s website. Payments made pursuant to these plans are not considered “earnings” for the purpose of the EI Act, so they do not affect current or future benefits claims.

A valid SUB plan must identify the group or groups of employees covered by the plan (employees should be grouped by category – e.g. hourly paid employees, employees in a certain classification, employees at a certain location, etc. – and should not identify employees by their names). The plan must cover a period of unemployment by reason of any one of, or combination of (at the employer’s choice): a temporary stoppage of work; training; illness; injury; quarantine.

For the Employer to ensure a valid SUB plan and ongoing compliance, the following conditions must be met:

• employees apply for and receive benefits in order to receive payments under the plan (with some exceptions);
• combined weekly payments received from the plan and the portion of the weekly benefit rate from that employment do not exceed 95 per cent of the employee's normal weekly earnings;
• payments under the plan be financed by the employer and that the employer keep separate accounts for those payments;
• all remaining assets revert to the employer or be used for payments under the plan or for administrative costs of the plan upon the termination of the plan; and
• the plan be submitted to the Commission prior to its effective date and that written notice of any change to the plan be given to the Commission within 30 days after the effective date of the change.

SUB plans must provide that the employees have no vested right to payments under the plan, except to payments during a period of unemployment specified in the plan. Additionally, they must also provide that payments in respect of guaranteed annual remuneration or in respect of deferred remuneration or severance pay benefits are not reduced or increased by payments received under the plan.

An employee whose net income (including EI and SUB) is above 1.25 times the maximum yearly insurable earnings ($66,375 for 2019) may be required to repay some of the EI benefits received. Employers may offset the repayment amount under the plan, but the amount of offset must not exceed 95% of normal weekly earnings when added to the SUB and EI payments already received. Repayment amounts are not calculated until the employee completes their tax return.

A SUB plan may be described and provided to the government in one or more of the following: union or association agreement; trust agreement; private carrier’s insurance policy; employee handbook; personnel policy bulletin; any other commitment signed by the employer.

SUB plans & the Canada Emergency Response Benefit (CERB)

Given the large number of EI applications, the government created the Canada Emergency Response Benefit (CERB) in an attempt to get money into the pockets of Canadians as quickly as possible. As of the date of writing this blog, the government has not published the regulations for the Canada Emergency Response Act (the Act which created the CERB). These regulations will be essential in understanding the application, if any, of SUB plans to the CERB. Currently, the Act states that employees will not be eligible to receive a CERB payment until 14 days have passed without receiving any payments from their employer. In practice, this means that a payment made to a worker pursuant to SUB plan payment would delay an employee’s entitlement to a CERB payment in that first CERB-covered period, and, potentially, disentitle them altogether beyond that initial 4-week period.

To be clear, at this point there has been no guidance provided with respect to any ability to top up CERB payments.

However, as mentioned above, we have learned that new SUB Plans, and/or modifications to existing Plans – still only applying to EI benefits in terms of how they are drafted and how applications are made – are being approved with quick (approximately 2 days) turnaround times.  This is leading to speculation that there may be wording in forthcoming Regulations (or amendments to the legislation itself in regards to the CERB) allowing the application of such SUB Plans to the CERB.  This would be consistent with the plea from the government for employers to do all they can for employees.  In the event a SUB Plan is registered in this regard and they do not allow for its application to the CERB, it could still be in place for the period at the end of the 16-week CERB benefit, if employees shift to EI at that point.

Given the fluidity of the current situation, and to assess what options might work for your organization, it is recommended that you receive specific advice with respect to any questions you may have about the SUB Plans, the CERB or any additional measures you are considering.

CCPartners continues to monitor announcements made by all levels of government as they are made and will continue to update you as they come. If you have any questions related to COVID-19 disruptions, CCPartners is here to help.