Policy

The legislative mandate of the WCB requires that sufficient funds be available in the Accident Fund for the payment of present and future compensation as estimated by the Board’s Actuary. The Accident Fund is considered to be sufficiently or Fully Funded when the total of all assets equals or exceeds 100% of the total liabilities. The Funded Position of the Accident Fund represents the current funding status of the fund.

The funding policy is based on the guiding principle of ensuring sustained fair compensation for injured workers at a fair price to employers. This means guaranteeing the appropriate level of benefits to injured workers in the long-term and providing cost-effective risk financing for employers.

The primary goals of the Funding Policy are to:

• Minimize the risk of being unfunded, thereby ensuring there is sufficient money available in the Accident Fund for the payment of present and future compensation
• Minimize cost volatility for employers so that the overall average premium rate for the current year will not vary significantly over the previous year’s overall average premium rate
• Minimize the total cost charged to employers by ensuring the Funded Position is appropriate in relation to our financial needs
• Ensure today’s employers pay for the current and future cost of today’s accidents

As part of the duty to ensure sufficient funds are available for the payment of present and future compensation, the WCB maintains a balance in the Accident Fund that exceeds 100% of total liabilities and includes an Occupational Disease Reserve. These additional funds are required to mitigate the impact of Funded Position Volatility on the premium rate.

This policy is effective July 1, 2008.

Interpretation

1.0 Accident Fund

The Accident Fund consists of all assets, liabilities, and reserves of the WCB. All money received by the WCB is to be paid into the Accident Fund and all expenditures of the WCB, including the costs of administrating the Act, are to be paid from the Accident Fund.

2.0 Board's Actuary

The internal actuarial staff of the WCB performs an annual valuation of the claim benefit liabilities to ensure the sufficiency of the Accident Fund. The valuation is reviewed by an external actuary who reports to the Board on the valuation in accordance with generally accepted actuarial practices.

3.0 Fully Funded

The fundamental financial principle of workers’ compensation is to have sufficient funds in the Accident Fund for the payment of present and future compensation, including the cost of administration.  The Accident Fund is considered to be sufficiently funded when the total of all assets equals or exceeds 100% of the total liabilities. For the purposes of this policy, the Accident Fund is considered fully funded when it is within the Funded Ratio target range of 114% to 128%.

4.0 Funded Position

The Funded Position of the Accident Fund is equal to the total of all assets minus the total of all liabilities. This Funded Position represents the current funding level of the Accident Fund. The Funded Position can be expressed in dollar terms or as a percentage of liabilities. When expressed as a percentage of liabilities, it may be referred to as the Funded Ratio.

5.0  Occupational Disease Reserve

The Occupational Disease Reserve is part of the Accident Fund. It was established to provide for costs arising from possible latent occupational diseases where a causal link to the workplace has not been established but may be established in the future. It is funded through the premium rate as a Funding Policy Requirement.

6.0 Funded Position Volatility

This is the amount of change expected in the Funded Position of the Accident Fund over time. This variability of the Funded Position is caused primarily by investment and actuarial volatility. The Funded Ratio target range is set between 114% and 128% to recognize the impact of Funded Position Volatility.

Please see Part II for additional information on the following subjects:

Application

1. Funded Position
2. Occupational Disease Reserve