Question Period Note: INTERACTION BETWEEN THE CANADA CHILD BENEFIT AND THE CANADA EMERGENCY RESPONSE BENEFIT

On June 8, 2022, the Parliamentary Budget Office released a report on how the income support received through the Canada Emergency Response Benefit impacted Canada Child Benefit entitlements.

• The Government of Canada is committed to giving families more money to help with the high cost of raising their kids and to making a real difference in the lives of our children.

• That is why, in 2016, the Government introduced the Canada Child Benefit to provide increased support for low- to middle-income families with children.

• The Canada Child Benefit is tax-free and based on income, so it provides more support to families who need help the most. The Canada Child Benefit provides support to over 3.5 million families, including over 6 million children, putting more than $25 billion, tax-free, each year in the hands of Canadian families.

On June 8, 2022, the PBO released a report entitled: The impact of the Canada Emergency Response Benefit and the three Canada Recovery Benefits on the Canada Child Benefit program. The report estimates the reduction in overall CCB payments resulting from COVID-19 benefits. They do so using two scenarios, first by estimating the incomes of families had Employment Insurance been in place instead of the suite of Emergency Benefits, and the second by excluding CERB and the CRBs from the definition of CCB income test. They estimate that CCB payments would have been $1.1 billion higher under scenario 1 over the period 2021-22 to 2023-24 and $1.4 billion higher under scenario 2 for that same time frame.

As a result of receiving CERB and CRB, the PBO estimates that 1.67 million families saw their CCB amount reduced by an average of $535 in 2021-2022, 791,000 families by an average of $606 in 2022-2023 and 596,000 families by an average of $133 in 2023-2024. The report states that among families seeing a decline in CCB amount in 2021-22, three-quarters experience a decrease of less than $750, which is roughly $60 per month.

The CCB is an income-tested benefit that provides a higher benefit to lower income families. In the 2022-23 benefit year (July 2022 through June 2023) recipients’ CCB payment is based on their adjusted family net income (AFNI) reported for the 2021 tax year.

o CCB payments that began in July 2022 have been based on 2021 AFNI.

o In the 2022-23 benefit year families with less than $32,797 in AFNI receive the maximum benefit of $6,997 per child under 6 years of age, and $5,903 per child aged 6 through 17.

In most cases, the CCB is delivered by the CRA in a single and integrated monthly payment that also includes provincial or territorial child benefits. These provincial/territorial child benefits have their own program parameters, including benefit amounts, eligibility and reduction thresholds based on income. In Nova Scotia for example, this includes the Nova Scotia Child Benefit (NSCB) which is targeted to low- and modest-income families.

In March 2020, as part of its wide-ranging economic response to the coronavirus (COVID‑19) pandemic, the Government of Canada announced the introduction of the Canada Emergency Response Benefit (CERB). The CERB provided financial support to workers who lost income as a result of the COVID-19 pandemic.
The CERB was delivered by the Canada Revenue Agency (CRA) and Service Canada and provided a weekly amount of $500 for up to 28 weeks, between March 15, 2020, and October 3, 2020. Applicants could retroactively submit their applications until December 2, 2020. The CERB was replaced by a suite of three temporary Canada Recovery Benefits in October 2020.
The CERB and the Canada Recovery Benefits were delivered through an attestation-based approach to enable fast delivery of emergency benefits to millions of Canadians. This attestation-based approach was designed to verify eligibility for emergency benefits through robust post-payment compliance and integrity measures.
If an individual met eligibility requirements for the CERB, they could have received $500 per week to a maximum of 28 weeks (totalling $14,000). CERB support payments are considered income for the 2020 tax year.

Interactions between the CCB and recovery benefits

Some individuals accessing the CCB may have seen a reduction in their CCB entitlement due to the income they received through the CERB or other COVID-19 emergency benefits. Other CCB recipients who also received the CERB may see little to no change to their CCB entitlement or an increase, depending on their specific income circumstances.

Analysis by Employment and Social Development Canada suggests that, particularly for low and medium income families, the interaction between the CERB and CCB does not create unintended consequences and that any resulting adjustments to the CCB provided to recipients are not expected to be significant. This assessment does not include provincial or territorial child benefits. It is important to note that although there was considerable overlap between CERB and CCB recipients, this does not mean that every family in this situation was negatively affected in terms of their CCB entitlement.

Families who had net income below $32,028 in 2020

All families with net income below $32,028 in 2020 were entitled to maximum benefits for the 2021-22 benefit year (July 2021 through June 2022). This meant that a family with 2020 income below $32,028 continued to receive maximum CCB entitlements even if CERB over-compensated lost income for that year.

For example, if a family made $25,000 in 2019, lost a job in 2020 and received $14,000 in CERB payments resulting in an increase to its 2020 income to $30,000, that family was still entitled to the maximum CCB in the 2021-22 benefit year. As a result, overall, the lowest-income families would not experience negative consequences from what they received in CERB income and in fact were better off overall; low-income families were the most likely to have been over-compensated by CERB (payments higher than lost income).

Families who had net income between $32,028 and $69,395 in 2020

CCB benefits diminished at a rate of 7% (for a one-child family) for incomes between $32,028 and $69,395 in 2020. Overall, the higher the income level, the lower would be the income replacement rate provided by CERB. This would have translated into higher CCB entitlements when incomes declined but potentially also lower CCB entitlements in cases where income increased due to over-compensation through CERB. In either situation, the impact was expected to be relatively small given the low reduction rates for the CCB.

Example 1 – Increased CCB

If a one-earner couple with one child aged 6-17 and a net income of $48,000 per year received CERB they were likely under-compensated. If the working parent lost their job due to COVID-19 and received CERB for 4 months, that parent would normally have earned $16,000 during those 4 months, but rather received $8,000 from CERB. Their adjusted net family income declined by $8,000 from $48,000 to $40,000 in 2020. The $8,000 shortfall in income would therefore have resulted in this family’s CCB to increase by $560 (a 12% increase) for the 2021-22 benefit year, from $4,647 to $5,207 relative to what they would have received had their income remained the same.

Example 2 – Decreased CCB

A couple with one child aged 6-17 and a net income of $50,000 per year has one of the parents working fewer hours than the other does. If one of the parents lost their job due to COVID-19 and received CERB for 4 months, that parent might normally have earned $6,000 during those 4 months, but rather received $8,000 from CERB. Their adjusted net family income increased by $2,000 to $52,000 in 2020. The increased income resulting from a CERB over-compensation reduced their CCB payments for the 2021-22 benefit year relative to what they would have received had they worked over those 4 months by $140 (a 3% reduction), from $4,507 to $4,367.

Families with net income between $69,395 and $167,811

For CCB-eligible families with net income over $69,395 in 2020, benefits diminish more gradually (at a rate of 3.2% for a one-child family) over this range. Overall, at higher incomes it was even less likely that parents were over-compensated by CERB. The replacement rates provided by CERB became smaller as the incomes of those claiming it increased. Overall, the reduced incomes resulting from CERB receipt would have translated into slightly higher CCB payments in 2021-22. There may however still be cases where CERB over-compensated a secondary earner which would have resulted in slightly lower CCB payments for the corresponding benefit year. The impacts would have been even smaller than they were over the previous income range given CCB’s lower reduction rate over $69,395.

Additional support provided in response to the pandemic

In 2021, families entitled to the CCB also received a temporary CCB young child supplement of up to $1,200 per child under the age of 6. This would have helped mitigate any loss in CCB entitlement in the 2021-22 benefit year for parents with young children as a result of the CERB.

In case of repayment of CERB amounts, those who repay a CERB overpayment can seek reassessment of their income with CRA and may have their eligibility for federal income tested benefits adjusted accordingly.

The Department of Finance is the policy lead on the CCB, and the Canada Revenue Agency administers the benefit. ESDC contributes to ongoing policy development by working collaboratively with them and with provincial and territorial governments to help ensure that the CCB continues to result in strengthened systems of support for all low- to middle-income families with children across Canada.

If pressed on interactions between CCB and emergency benefits

• The Canada Child Benefit is income tested and based on the income from the prior year. This ensures that the benefit targets support to those who need it most.
• As reported by the Parliamentary Budget Office, some individuals who received emergency income supports related to Covid-19 may have seen a reduction in their CCB entitlements in subsequent years
• However, it is important to note that low income families have been shielded from any decline in their CCB, again reflecting the income based nature of the CCB. Families that benefited from the Canada Emergency Response Benefit or other income supports introduced in response to the pandemic were better off overall, than if those benefits had not been available.