The Quebec Parental Insurance PlanLinkedIn
There, in black and white
NB Bulletin Vol. 8 N. 5, March 2005
The final Canada-Quebec agreement on the Quebec Parental Insurance Plan was signed on March 1, 2005. The provincial plan offering parental benefits will therefore begin January 1, 2006.
On May 25, 2001, the National Assembly adopted Bill 140, an Act respecting parental insurance. The Bill outlined the structure of a future parental insurance plan within the province of Quebec. However, before implementing the plan, the Government of Quebec had to reach an agreement with the Government of Canada to recover a portion of contributions to the federal program by Quebec workers and employers.
Beginning with the first effective year of the plan, the final agreement between the two governments provides that the Government of Canada will reduce the annual Employment Insurance contributions of Quebec workers and employers by approximately $750 million. This represents the approximate cost of one year of maternity and parental Employment Insurance benefits to Quebec residents. The Government of Canada also agreed to transfer a lump sum amount to ease the transition, as well as a minimum annual amount to cover the administration costs that the Government of Quebec will assume in its place. Individuals whose benefits commence prior to January 1, 2006 will continue to receive benefits under the federal plan.
The objective of the new provincial plan, based on the Act respecting parental insurance, is to grant eligible Quebec workers maternity, paternity, parental and adoption benefits which would be more generous than what is currently offered by the federal plan.
The rules in the provincial plan will be different than those in the federal plan. For example, the minimum number of hours worked in a year is replaced by an eligibility criteria based on annual insurable earnings ($2,000), self-employed workers are eligible and the two weeks waiting period is eliminated.
The weekly benefit amount will be equal to a variable percentage of insurable earnings. Based on the two options offered for maternity and parental leaves, the percentages could be equal to 70% for the first 25 weeks and 55% for the following 25 weeks or 75% for 40 weeks. Different provisions would apply for adoption and paternity leaves. Insurable earnings are subject to the maximum in effect at the Commission de la santé et de la sécurité du travail (CSST), estimated at $57,500 for 2006, which is a significant increase relative to the maximum projected at $39,000 for 2006 under the federal plan.
The contribution rate of Quebec workers to the federal plan will be reduced for the parental insurance portion effective January 1, 2006. However, effective on the same date, Revenue Quebec will start collecting contributions to the provincial plan. Nevertheless, it is not certain that the contribution rate fixed by the Government of Quebec will be equivalent to the reduction of the contribution rate to the federal plan. The agreement between the two governments does not allow for the full funding of the more generous plan; the gap is estimated at $250 million. This gap could also lead the government to change the income replacement ratios, while keeping them equal to or above 55%, which is the current income replacement ratio under the federal plan.
Impact on group benefit plans
It is interesting to note that if the income replacement ratios are above 55%, employers offering a supplement to maternity and parental benefits for their employees (either through their income replacement plan or a supplementary unemployment benefit plan) will see their private plan costs decrease.
Normandin Beaudry will remain up to date on decisions regarding the provincial parental insurance plan, in particular the income replacement ratios and the contribution rates, and will keep you informed of any major developments in this regard.
Please feel free to contact us for additional information.
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