Separate Employment Insurance Financing from Direct Government Control, says the Canadian Institute of Actuaries



    OTTAWA, Dec. 3 /CNW Telbec/ - With the country's Employment Insurance
(EI) account sitting at $54 billion and growing, Canada's actuaries say it is
time to implement deep reforms. In a report made public today, the Canadian
Institute of Actuaries presented a series of recommendations on the
governance, funding, rate-setting and the surplus in the EI Account.
    The report, A Look Back and A Way Forward: Actuarial Views on the Future
of the Employment Insurance System, concluded that continuing with the current
financing approach to the EI fund is flawed. "The essential character of the
EI program, since its inception, is that it is an insurance program. Premiums
contributed to the program, and resulting surpluses, belong to the program"
said the Institute's president-elect, Michael Hale. "Unfortunately we have
gotten away from that principle over the years but perpetuating the existing
financing structure is inappropriate."
    The report urges the federal government to move quickly to create a new,
independent governance body to take over responsibility for funding,
investment and borrowing policies of the EI system. The report also contends
that the current premium-setting process is confusing, lacks transparency and
credibility, and grants little or no independence to either the EI Commission
or its actuary, whose role is severely constrained. In addition, the system is
run on a single year basis, leaving no room to correct past or current
overcharges (or undercharges) and little flexibility to deal with an economic
slowdown or recession.
    "These points have certainly been an issue with a number of stakeholders
in the EI system over the years, and we're pleased to see that the government
put it on its radar screen in the recent Speech from the Throne. We're hoping
our report will help move the public debate toward an acceptable solution. In
the meantime, we're offering a principles-based approach that we believe is in
the public's interest," said Hale.
    Among the report's recommendations, the Canadian Institute of Actuaries
is calling for a new, autonomous governance council to manage the fund. The
new body would have broader representation from worker and employer groups
than on the current EI Commission, and more public interest representatives
including an actuarial nominee.
    Premium rates would be set independently by the new body and it would
establish and manage a separate investment fund. "The strategy for setting
premium rates and investing reserve funds would be the sole responsibility of
the new entity, and would be based on principles-based actuarial advice to
ensure the fiscal integrity and long-term viability of the fund when times are
good or when times are bad," said Hale. "To ensure accountability and
transparency, the new entity would report to Parliament. Benefit policies and
the operational delivery system would remain the responsibility of
government," said Hale.
    The Institute pointed out that there are a number of alternative models
for a renewed EI governance approach, including the Canada and Quebec Pension
Plans and provincial Workers' Compensation programs. "We're putting forward a
plan that is consistent with these precedents," said Hale.

    The Canadian Institute of Actuaries is the national organization of the
actuarial profession. Member driven, the Institute is dedicated to serving the
public through the provision, by the profession, of actuarial services and
advice of the highest quality. In fact, the Institute holds the duty of the
profession to the public above the needs of the profession and its members.
    Actuaries employ their specialized knowledge of the mathematics of
finance, statistics and risk theory on problems faced by pension plans,
government regulators, insurance companies (both Life and Property/Casualty),
social programs and individuals.




For further information:

For further information: Josée Racette, (613) 236-8196 ext.107;
www.actuaries.ca

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