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Invesco Tax & Estate team | November 25, 2020

Transitioning from CERB to EI benefits or the new CRB

Learn how Employment Insurance (EI) benefits and the new Canada Recovery Benefit (CRB) are replacing support offered by the Canada Emergency Response Benefit (CERB).

Back in March, mounting restrictions related to COVID-19 abruptly interrupted the way of life and livelihoods of millions of people across Canada. At that time, the federal government implemented several programs to provide financial benefits for people with incomes affected by the pandemic, including the Canada Emergency Response Benefit (CERB). Given the urgent need for support, all benefit claims for people whose incomes declined because of COVID-19 were processed through CERB, regardless of whether the affected individuals qualified for Employment Insurance (EI) benefits or not.

In October, the federal government wound up the CERB program and transitioned to a dual system under which individuals may receive either EI benefits or the new Canada Recovery Benefit (CRB), depending on their eligibility. In general terms, those who qualify for EI must receive EI benefits. Those who do not qualify for EI, but whose weekly earnings have declined as a result of the pandemic, may be eligible for CRB. Find details on EI eligibility here and details on CRB eligibility here.

Employment Insurance benefits

Those who still need financial support, previously paid into the EI program and meet qualifying criteria can transition to the EI program at the end of the last CERB benefit period. While this is a return to a more familiar program that has been a cornerstone of the Canadian benefits system for many decades, the federal government recently made two important temporary changes to EI.

Minimum unemployment rate of 13.1% assumed

The EI program is assuming a minimum unemployment rate of 13.1%  for all regions of Canada, even if the unemployment rate in a particular region is less than 13.1%. This is significant because a greater unemployment rate in a region reduces the EI eligibility conditions for residents of that region. In part, this means that employees who have accumulated 120 hours of insurable work or more may meet the minimum required number of insurable hours they need to qualify for EI. Those who live in regions where the unemployment rate is greater than 13.1% will benefit from further reductions to the required number of insurable hours.

In addition, the unemployment rate determines the length of time someone can receive EI benefits. At 13.1%, individuals who qualify for EI are eligible to receive EI benefits for a minimum of 26 weeks (6 months).

EI minimum payments increased

The minimum weekly EI payment amount has temporarily increased to $500. EI benefits are taxable income, and part of the benefit payment is withheld at source to cover taxes on that income. Whether more or less tax than the amount withheld is owed when recipients file their taxes in the following year depends on how much total income they received in the year. Note that $500 is the minimum weekly payment amount for individuals who qualify for EI; some applicants may be eligible to receive up to $573 per week.

Canada Recovery Benefit

The new CRB ensures that those who do not qualify for EI but whose earnings are affected by COVID-19 continue to receive support. The CRB program will run for approximately one year, from September 27, 2020 to September 25, 2021. Individuals can only receive CRB benefits for a maximum of 26 weeks (6 months).

Benefits of $1,000 every two weeks

The new benefit pays a gross flat rate of $1,000 every two weeks to all those who qualify. As with CERB, CRB is included in the recipient’s income and taxable in the year it is received. As a partial pre-payment of taxes owing, the Canada Revenue Agency withholds 10% of the benefit at source, leaving eligible recipients with a net amount of $900 every two weeks.

More flexibility to earn income while on CRB

A significant difference between CERB and its successor, CRB, is the allowable amount of income someone can earn while receiving benefits. With CERB, individuals earning more than $1,000 in employment income in a given month were disqualified from receiving any benefit for that period. Under CRB, applicants can earn up to $38,000 of net income in 2020 without any impact on their eligibility for the benefit. The CRB program does not have a monthly earnings limit; in other words, a recipient could earn the entire $38,000 in a single month (and no other income during the year) and remain eligible for the benefit. For every dollar CRB recipients earn above the $38,000 limit, they must repay 50 cents of their CRB benefit to the federal government.

Times are changing quickly, and the federal government’s response is changing, too. Stay tuned for further developments as they unfold. In the meantime, find more information on the federal government’s response to COVID-19 here:

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The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed.