"ITO 2.0 Ottawa has retrieved the following answers from Service Canada".
This is in follow up to the recent EI information Sessions hosted by ITO 2.0
.
These are to be considered general answers for information purposes only. The EI Act and Regulations would apply to specific circumstances.
1. CV PENSION ALLOCATION
Any portion of the pension that is transferred into another locked-in account will only impact a claim for EI when it comes out of that locked-in account (Digest 5.13.7) The excess portion ( Digest 5.13.11.2 http://www.servicecanada.gc.ca/eng/ei/digest/5_13_0.shtml#a5_13_11_2) will be allocated as a lump-sum pension.
"Lump-sum pension benefits are allocated in a special manner. As these earnings were paid to the claimant in lieu of a pension, they were meant to compensate him or her in the same way as a pension does. To allocate them using normal weekly earnings, would be to assign these earnings to a relatively short period of time, whereas they were intended to cover the claimant for the rest of his or her life, in the same manner as a periodic pension. This is why lump-sum pension benefits are converted to the equivalent of what these payments would have been, had they been paid as an annuity.1
To perform this calculation, there is a schedule2 showing the annuity equivalent amount for each $1000 of lump-sum payment made. The claimant's age at the time of the lump-sum payment determines the annuity equivalent amount to be used in the calculation. The lump-sum amount is then divided by 1000, and the resulting figure is multiplied by the annuity equivalent amount. A $30,000 lump-sum pension payment to a claimant who was 56 years of age would be allocated at an amount of $47.40 (30 x $1.58) per week. The impact on this claim is vastly different than if this amount would have been allocated at a normal weekly earnings rate of, let's say, $600.00 for fifty weeks.
See Digest 5.13.6.4 http://www.servicecanada.gc.ca/eng/ei/digest/5_13_0.shtml#a5_13_6_4
and EIR schedule 2 http://www.servicecanada.gc.ca/eng/ei/legislation/main_regs_e.pdf
2. SEVERANCE PAYMENTS DURING OR AFTER A CLAIM ENDS
Regardless of when severance pay is paid out, it is the reason for it's issue that determines how it impacts a claim. The date from which it is considered earnings i.e. whether it is paid because of layoff or a statutory passage of time, determines the start date for allocation on an EI claim. If a bankruptcy trustee, tribunal or successful litigation results in the payment of severance pay even a after a claim has ended, it will be allocated to the date determined by the reason for it's issue. This means that it could be allocated after a claim has ended to a period when the claim was active. Usually in this case however, the claim is extended for a period similar to the severance allocation period and the claimant, if eligible, would not be negatively affected if they remained eligible for benefits during the extension period. Similarly, if the EI claim is active and severance pay becomes payable, it will be allocated as earnings from the appropriate date described above, thus delaying the claimant's right to benefits during the allocation period, however the claim is extended as previously noted. Please note the maximum claim extension is 52 weeks.
"Severance pay is a form of recognition for years of service and is paid to compensate for the loss of employment. It is almost always paid only when the employer-employee relationship completely terminates. Collective agreements or company policy may contain a clause requiring the payment of severance pay in certain circumstances. Factors such as length of service and the employee's position may dictate the amount of the payment. Severance pay paid to comply with provincial legislative requirements is a legislated form of recognition for service and the amount is also based on a formula related to the years of employment with that employer.
Labour legislation, when applicable, may require the payment of severance pay immediately upon separation or when, by provincial statute, a separation is determined to have occurred. In those provinces where such legislation is applicable, the last day of work, that is, date of lay-off, is the date used to calculate the beginning of the lay-off period. When the claimant has not been recalled to work after a designated number of weeks or months has passed, the provincial legislation states that a separation occurs at that time, and requires the payment of severance pay.1 In this scenario, both a lay-off and a separation have occurred at different times. Severance pay is payable by reason of the separation, which occurred only after a certain period of time passed, and not by reason of the lay-off. In this case the severance pay would be allocated from the week of the separation from employment. Wages in lieu of notice may also be payable and would be allocated from the week in which the lay-off or separation occurred, depending on which event gave right to the money.2
Severance pay is earnings paid or payable by reason of a lay-off or separation. It is therefore allocated at normal weekly earnings from the week in which the lay-off or separation occurred, depending on which event gave right to the money.3
see Digest 5.12.6 http://www.servicecanada.gc.ca/eng/ei/digest/5_12_0.shtml#a5_12_6
3. RRSP OR INVESTMENT INCOME WHILE RECEIVING EI
Generally speaking investment income is not considered income for EI purposes. Redeeming/cashing a personal RRSP would not be considered earnings arising from employment, however, a return employer of contributions to a pension would be considered earnings.
"A return on investment is not the result of involvement in the actual operation of a business on the owner's own account or in a partnership or co-adventure. When there is involvement in the operation of a business, there is "work" performed by the person. When there is only an investment of funds or capital and no participation by the owner, the investor is not engaged in the operation of the business and there is no element of employment. Moneys gained from a return on investment1or a return on capital are not considered to be arising out of employment or self-employment." for a more detailed explanation, see Digest 5.3.1.6 re investment income http://www.servicecanada.gc.ca/eng/ei/digest/5_3_0.shtml#a5_3_1_6 and 5.13.8.2 re return of employer's contributions http://www.servicecanada.gc.ca/eng/ei/digest/5_13_0.shtml#a5_13_8_2
4. REPAYMENT OF EMPLOYMENT INSURANCE BENEFITS
Whatever the type of benefits you receive, EI payments are taxable income, meaning federal and provincial or territorial taxes, where applicable, are deducted when you receive them.
At the time you file your income tax return, depending on your net income and if you were paid regular benefits, including regular fishing benefits, you may be required to repay some or all of the EI benefits you received. If your 2008 net income from all sources exceeds $ 51,375 you will be required to repay 30% of the lesser of:
* your net income in excess of $ 51,375; or
* the total regular benefits, including regular fishing benefits, paid in the taxation year.
Exemption :
You do not have to repay your EI benefits if:
* your 2008 net income is less than $ 51,375 ; or
* you received less than 1 week of regular or fishing benefits in the preceding 10 taxation years, or
* you were paid special benefits, i.e. maternity, parental, sickness or compassionate care benefits. However, if you received a combination of regular and special benefits within the same tax year, you may still have to repay a percentage of the regular benefits received.
If you received EI regular benefits that overlap 2 calendar years, you may qualify for the exemption in the 1st taxation year. However, in the following taxation year you would not qualify for the exemption as there would be more than 1 week of regular benefits paid in the preceding 10 years.
5. REPAYMENT OF SETTLEMENT MONIES
While we cannot speculate as to how much of the settlement monies will be paid back or allocated, we can say that whatever lawyer fees that were paid as a result of the lawsuit will not be part of the monies allocated. Once the settlement is reached, the Employment Insurance Commission will need to view the minutes from the court decision in order to fully assess how much will be allocated and how they will be allocated. Therefore, until a settlement is reached no additional information can be given in this regard.
Fred Nesrallah
Program Manager
ITO 2.0