Salary Continuance Top Up – Supplemental Unemployment Benefit (SUB)

Feb 11, 2014

A SUB – You might say this is the difference between sinking financially and keeping your head above water!

If a major illness or injury takes you out of the work force, your financial obligations (mortgage, rent, car, credit card payments…) don’t stop.  In fact if anything, expenses may increase as you deal with medical-related costs.

Your ability to earn income is your greatest asset and needs to be insured.   Many employers provide some form of short term sick leave but most rely on the federal government’s Employment Insurance (EI) Sickness benefit for coverage.  EI provides a limited plan starting after a 14 day wait and compensating employees at 55 percent of their insurable earnings up to a maximum weekly benefit of $514.  The benefit is paid out for a maximum of 15 weeks.

But here’s the rub:  the EI benefit is taxable; you only receive 55% of earnings (less, after tax); and the maximum benefit is low, so for many moderate-income employees, the maximum amount is considerably less than the 55% of earnings!

That’s when a Supplemental Unemployment Benefit (SUB) can rescue you.  Many employers realize the limitation of the EI program and are willing to provide an ‘income top up’, or SUB, to key employees.

Employers use SUB plans to increase the employee’s weekly earnings during periods of unemployment (maternity leave too). Payments from registered plans are not deducted from the employee’s regular EI benefits. A  SUB plan needs to be registered with the EI office otherwise, employer payouts will offset  the standard EI benefit.  In addition, payments under a registered SUB plan are not considered as insurable earnings, therefore, EI premiums are not deducted.

More information is available from your benefits advisor or Service Canada (http://www.servicecanada.gc.ca/eng/cs/sub/0200/0200_010.shtml#a0 ).

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