Thank you, Mr. Chairman.
My name is Michel Bédard, and I thank you for your invitation to testify before the Committee concerning Bill C-56. I am an actuary by profession and I am appearing in my personal capacity. I was Chief Actuary to the Employment Insurance Commission from 1991 to 2003. I have also completed a number of missions for the International Labour Office as an employment insurance consultant.
I support the principle of the bill, namely the extension of special employment insurance benefits to the self-employed, but several aspects of it are problematic. My first comments relate to the financial aspects of the plan.
First, the new benefits would cost about $305 million in 2014, with about $212 million in parental benefits, that would be paid totally outside of Quebec; $93 million in sickness benefits, that would be paid out countrywide; and less than one million dollars in compassionate care benefits. The cost of these benefits represents 2.5% of insurable earnings in the case of parental benefits, and 0.9% in the case of sickness benefits, for a total of 3.40%.
These calculations are based on data from Human Resources and Skills Development Canada, as supplied to your committee. In broad terms, the Department assumed that all those who joined the plan in order to receive parental benefits would ultimately receive them, or leave the plan, whereas in the case of sickness benefits, only 10% of the newly ensured would receive benefits.
What does Bill C-56 propose?
In 2014, a deficit of $86 million outside Quebec and a surplus of $18 million in Quebec, with contribution rates of 2.33% and 1.96% respectively. A rate of 1.96% in 2014 for self-employed workers in Quebec would thus represent double the forecast cost for this protection alone, the cost being 0.9%. This would be four times the rate now applicable to wage-earners for sickness and compassionate care benefits. This rate presently sits at 0.41%. We can calculate that at 1.36%, which was the rate in 2010, revenue in Quebec would already exceed costs. A representative of the Department confirmed this, stating before the Senate Standing Committee on National Finance that with a rate of 1.36%:
The typical self-employed individual in Quebec will receive benefits roughly equivalent to what the individual pays in premiums.
If so, why expect the rate to rise in the future? Together, these financial impacts therefore constitute the first stumbling block, in my opinion.
Second, the voluntary nature of the proposed system requires the government to impose strict conditions on those who wish to take advantage of it, in order to protect against opting out and abuse. There would accordingly be a waiting period of 12 months, which is much longer than what private schemes apply. Even in California, the comparable period is six months, for those who join the voluntary scheme for self-employed workers, and which it too is a disability insurance plan.
A third aspect that poses a problem, and will discourage participation in the plan, is the rule that would commit for life those who have received even minimal benefits, particularly for sickness. Have we ever seen income insurance that demands a lifetime of contributions after a minor claim? In California, the voluntary portion of the public disability insurance plan allows withdrawal after two years.
Fourth, if someone joins the plan mid-year, BillC-56 would require that they wait 12 months for coverage, but would require them to pay benefits for the entire year. Why not arrange to prorate contributions in such cases? As an alternative, the plan provides for those who register from January to March 2010 to qualify for benefits from January 1, 2011. Why not provide a similar clause for every year?
Fifth, and last, the employment insurance plan already includes a refund of contributions for those earning under $2,000 a year, since they do not qualify for benefits. Should there not be a similar clause in this voluntary plan, but based on a level of $6,000?
What are we to make of all of this?
Firstly, financially, with regard to these new benefits, it is inappropriate to adopt artificially the general rate for employees. Rather, we should select a funding mode that is proportional to the cost of the new benefits, and relatively stable.
Secondly, in order to fund a social benefit, namely parental benefits, while making it voluntary, the government found it necessary to impose strict limits. Among other things, these limits will have the effect of discouraging many potential participants, and make the system much less effective as a way of protecting incomes.
That is the gist of what I had to say.
I'll be pleased to answer any questions.
Thank you.
