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Flashcards in chap 7 Income protection plan Deck (29):

3 government plans that offer income protection

1) Worker Compensation
2) Employment insurance
3) CPP disability benefit


6 social insurances

1) worker compensation
2) EI
3) CPP disability benefit
4) CPP
5) Retirement benefit
6) Death benefit


6 Characteristics of social insurance

1) compulsory
2) benefit provided relates to income
3) The benefits are prescribed by law
4) benefits are not means tested
5) are contributory
6) benefits are paid out of contributions, not tax


Workers' compensation

Canada's first social program, originated in ontario in 1915. Workers can be compensated for injuries if they give up the right to sue


4 underlying principles of worker compensation

1) Employers bare the direct cost of compensation in return for protection against lawsuit
2) workers give up the right to sue
3) negligence and fault are only considered when determining premiums
4) administered by a neutral agency


Worker compensation determination of premiums

Based on earnings before deductions. Workers are divided in divisions according to their occupation and then subdivided in Major Groups and then further subdivided


Worker compensation/maximum assessable earnings

the maximum amount of earnings for each employee covered by Worker Comp. In most provinces it is also the maximum earning covered


Taxation on Worker compensation

it is added to taxable income, so affects the ability of a spouse to deduct the impaired spouse as dependent and the amount of child tax credit. There is then an offsetting deduction making Worker Comp non taxable


worker compensation : non economic loss

when a worker is permanently injured and can not return to work, most jurisdictions provide a benefit that recognize there is a loss beyond wage loss. Benefits are also adjusted for age and inflation


Worker compensation: survivor benefit

when a worker dies as a result of a work related injury, surviving spouse and other dependents receive a lump sum payment plus a monthly benefit


3 objectives of Employment Insurance

1) Provide income during short time involuntary unemployment
2) Help unemployed workers find jobs


Premiums for Employment Insurance

1.73% on all eligible earnings (not investment income) up to 731$. Employee premiums are eligible for non refundable tax credit and employers pay 1.4 times more than employee which are tax deductible


Uninsurable employment income

Includes self employed income, lump sum, scholarship, research grant, payment under wage loss replacement plan, casual employment


EI: 5 categories of benefit

1) Regular benefit
2) Maternity, parental and sickness benefit
3) Compassionate care benefit
4) Fishing benefit
5) work sharing benefit


EI Regular Benefit

pay from 14 to 45 weeks if:
-the employee lost his job through no fault of his own
- has been without work for at least 7 days
- has worked the required number of hours in the previous 52 weeks


Qualifying period for EI

it is the shorter of: 52 weeks OR period since the start of the last claim


Amount of EI benefits

1) look at total earnings on the last 26 weeks of work
2) find the unemployment rate in the region and the min divisor that apply for that region
3) Determine the average weekly insured earnings by dividing last 26 week earnings with the greater of: # of weeks worked OR min divisor
4) multiply the result by 55% to get the weekly benefit to a max of 447$


maternity benefit

for birth of surrogate mother to a maximum of 15 weeks


Parental benefit

for birth or adoptive parents to a maximum total of 35 weeks


sickness benefit

for sickness, injury or quarantine to a maximum of 15 weeks


eligibility for parental, maternity and sickness benefit

regular weekly earnings has decreased by more than 40% AND the employee has accumulated 600 insured hours in the last 52 weeks


Compassionate care benefit

paid up to 6 weeks to a person who has to be absent from work to provide care or support to a gravely ill family member at risk of dying


Work sharing benefits

available for employees who accept a temporary reductions in workload if there is a temporary reduction of orders. can last from 6 to 52 weeks. employees must meet normal requirement for regular EI benefit


Private disability plan

the amount of coverage is based on income at the time policy is taken and can be up to 80% for taxable benefit


5 parts of a private disability insurance

1) Definitions
2) Benefits
3) Contract provisions
4) Exclusions
5) Riders


eligibility requirements for group disability insurance

1) Only full time direct employees can participate
2) there is a probationary period before a new employee can join
3) after the probationary period, employees have to sigh up during the eligibility period
4) employee has to be actively at work when the insurance becomes effective
5) in a small group, all employees must participate


characteristics of short term disability plan

1) Pay benefits for 13 to 52 weeks
2) short or no elimination period
3) may provide coverage if the accident happends off the job
4) provides own occupation coverage
5) benefits are a % of earnings
6) few exclusions


Dual definition of disability used on long term group disability plans

between 0 and 2y: disabled if you cannot work at your own occupation
after 2 years: disabled if you cannot work at any occupation


Taxation of disability income

if an indiv pays for individual or group insurance, income is not taxable when received. If the employer pays the premium then income is taxable when received