May 5, 2020
CERB, CESB and negative interest rates: Ask BNN Bloomberg answers your personal finance questions
We are establishing the plumbing for the infrastructure for social assistance of the future: CIBC's Tal
With growing economic uncertainty during the COVID-19 pandemic, the financial landscape is shifting every day.
Whether it's dealing with sudden unemployment, ballooning debt, or expenses related to working from home, BNN Bloomberg wants to help Canadians navigate these uncharted waters.
That’s why we created Ask BNN Bloomberg, where you can have your personal finance questions answered by industry professionals.
Email or send your questions via video to firstname.lastname@example.org, and we will aim to answer them weekly.
Questions and answers have been edited for clarity. Last names will not be used.
Qualifying for CERB while overseas
Diane in Montreal:
I am a Canadian who was on a working holiday visa in Italy. I was meant to fly back this month but my flight was cancelled due to the virus. I have been in quarantine for approximately 40 days. I did earn more than $5,000 in Canada in 2019 and I am a resident of Canada. Moreover, I was coming back to Canada for the purpose of finding work and I already had some interviews lined up. I called [Canada Revenue Agency] on the phone to ask and the young lady seemed confused and then finally told me that I am eligible for Canada Emergency Response Benefit (CERB) but she didn’t seem sure.
Can you please let me know whether or not you think I am truly eligible for CERB? I fit all of the requirements except I got stuck in Italy during the time of the quarantine. (April 21, 2020)
Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory Service:
To qualify for the Canada Emergency Response Benefit you have to meet a number of conditions.
First of all, you have to be at least 15 years of age. Second of all you must be a resident of Canada, so clearly, I think that you would be considered a resident of Canada for tax purposes. Thirdly, you have to have a minimum of $5,000 of employment income or self-employment income either in 2019 or in the 12 months prior to application to meet that criteria.
Of course, the final criteria is that you must have stopped working and stopped earning employment or self-employment income as a direct result of COVID-19. Perhaps you were sick or you actually lost your job because your employer is basically no longer paying you as a result of COVID-19, or you’re taking care of a family member perhaps with COVID but again, I think this particular scenario would be problematic because I’m not sure if you actually lost your job, you don’t have a job, you’re not currently employed.
The fact that you are looking for a job and you have some interviews right now, I’m not sure you would meet the technical conditions of losing your job as a result of COVID-19 or are technically unable to work.
These are rules of course that are open to interpretation so again you may want to just check to confirm with the CRA or Service Canada to see whether or not they believe you qualify. (April 30, 2020)
Should I apply for CERB or CESB?
Tabitha in Hamilton, Ont.:
I am a 20-year-old student living in Hamilton, Ont. I work at a restaurant which is now limited to take-out orders only. I informed my employer that until I feel safe again working at their business, I will be taking a temporary leave. My reason for doing this is because my mother is immune compromised. She has diabetes and has recently been diagnosed with stage four cancer. Obviously, I am not wanting to put her life at risk by me interacting with the public at my job. My employers are very understanding of my situation, and had no issue with my temporary leave.
I have recently learned that those who voluntarily leave their work are not eligible for the Canadian Emergency Response Benefit (CERB). At this time, I have received two automatic CERB payments. I am unsure if I am eligible to receive CERB now and I am wondering if I should apply for the Canada Emergency Student Benefit (CESB) once it becomes available. I’m pretty sure I will qualify for the CESB, but I do not know if I can apply for it after already receiving two of the CERB payments. If I were to apply for the student benefit I would assume they would take the CERB payments back eventually; but if I am (unknowingly) eligible for CERB should I be risking it to apply for CESB?
This whole situation is very confusing. As I am a student I have to think about the cost of tuition, books and living expenses beginning in September. I am concerned that because of my lack of hours this summer I will be unable to afford the things necessary for me to continue with my schooling. If you could provide any insight to this situation it would be greatly appreciated. (April 27, 2020)
Jessica Moorhouse, financial counsellor and personal finance blogger for JessicaMoorhouse.com:
This whole situation is very confusing, I agree! Let’s dive into your first question about whether or not you are in fact eligible for CERB. You’re correct that the criteria states that if you voluntarily quit your job you would become ineligible for the benefit (CERB). However, you did not quit your job, you are simply on temporary leave.
On the government’s website, it states that you do not need to be laid off to access CERB, and can be eligible if you are still attached to your company (which you are). However, you did voluntarily request a leave of absence, and I suspect the criteria is saying that if you weren’t laid off from your job but your employer is no longer giving you shifts due to COVID-19, then you can get CERB. In your situation, it’s less clear if you would be eligible. I’m inclined to say you may not be.
However, there is a new section on the government’s question and answers page that does address your situation of feeling uncomfortable continuing to work because you have someone at home with a compromised immune system. Unfortunately, it doesn’t give a simple yes or no answer and just re-iterates the original eligibility criteria (including that you cannot voluntarily quit your job) and suggests speaking with your employer about improving workplace safety.
In terms of whether you should consider applying for CESB, since this benefit won’t be available until May and there is still very limited information and criteria on it, I would personally wait until there is more information about it before deciding. Since it is a benefit for students who are ineligible for CERB, if you are eligible for CESB, that means you will have to repay both CERB payments (most likely when you file your taxes next year). (April 28, 2020)
Is there a clawback clause with CERB?
Aidan from Surrey, B.C.:
I'm interested in learning if the CERB has a clawback clause. In my case, for example, I'm being offered a few hours of work per week, which would take me over the $1,000 level of monthly income but under $2000 I would get from CERB. If I go over $1000, do I lose CERB totally or does the system claw back the overage amount from my $2000 benefit, allowing me to make more than the $2000 per month through a combination of income and benefit?
Sorry for the rambling, stressful times. Thanks so much! (April 23, 2020)
Robyn Thompson, personal finance expert and president of Castlemark Wealth Management Inc.:
When submitting your first claim for the CERB, it’s important to understand you cannot have had more than $1,000 of employment income or self-employment income for 14 consecutive days or more during the four-week benefit period. Now for consecutive claims you cannot have more than $1,000 worth of income in the four-week benefit period.
There is no such thing as a clawback provision, which means if you were to make say $1,500 from your employer, you would not be able to scale back the $500 to $1,000 and then apply for the CERB. Now on April 15, the government of Canada put proposed changes to the CERB which would allow more people to potentially qualify under the program.
Specifically, these are people who make less than $1,000 a month; they could be students, part-time workers, perhaps contract workers, that need access to additional funds. Technically, they could earn up to $1,000 and then they could earn another $2,000 from the CERB if they qualify. The government of Canada continues to update eligibility requirements so check back on their website often to see if you qualify for the program at a different time. (April 29, 2020)
Are negative interest rates likely?
Bill in London, Ont.:
Are negative interest rates even possible in Canada? How likely is it? Is it true that interest can be deducted from savings accounts? (April 27, 2020)
Marc Goldfried, chief investment officer and head of fixed income at Canoe Financial:
The Bank of Canada’s (BOC) main monetary policy tool is the "overnight rate". This rate is used to encourage or cool economic output and inflation. Lower rates encourage borrowing and expansion, while higher rates discourage borrowing and slow growth. Today it is at 0.25 per cent - the lowest level since the Great Financial Crisis. The BOC does have the ability to take that rate to negative territory similar to Japan and Europe. We believe there is a lower probability of this happening and that the Bank will look to use other tools to manage a greater slowdown than what is expected; however, it is possible.
The rates that the government borrows at are known as the "Government Bond and Treasury Bill Rates". These tend to drop when there is slow growth and little inflation; and the opposite when growth is strong and inflation is picking up. They are live, actively traded and change minute by minute. Given the economic devastation that has occurred related to population containment because of COVID-19, there is very little in the way of higher inflation expectations. In that environment, we would expect government borrowing rates at most terms, to approach zero and potentially go negative. (April 28, 2020)
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