WorkSafeNB is committed to achieving and maintaining a fully funded financial position. A fully funded system is essential for securing financial obligations associated with the payment of current and future worker benefits and the administration of an effective workers’ compensation system.
This policy outlines how WorkSafeNB achieves and maintains a fully funded status with the primary goals of managing:
Full funding
1. The workers’ compensation system is funded through employer premiums and investment returns earned on the portion of those premiums set aside in the Accident Fund.
2. Each year, WorkSafeNB sets the provisional average assessment rate at a level sufficient to provide for all current and future worker benefits for accidents expected to occur during the year for which rates are set. The anticipated cost of claims including administration expenses is estimated using actuarial methods and assumptions, in accordance with accepted actuarial practice for Workers’ Compensation Boards in Canada.
3. Premiums are invested as outlined in Policy 34-200 Investment Goals and Objectives, with the investment returns funding a portion of the future cost of claims.
Recognition of assets
4. WorkSafeNB recognizes assets at fair market value in the most recent audited financial statements to determine the impact of the funding level on the annual employer assessment revenue requirements.
5. Amounts held in the Accident Fund as restricted cash are not considered in the determination of surcharges or rebates to employers or in any surplus distributions referred to under sections 15, 16 and 17 of this policy.
Recognition of liabilities
6. The total liabilities recognized for the purposes of this policy will include liabilities for benefits to injured workers and administration expenses as determined through a valuation performed by an actuary using assumptions and methods in accordance with accepted actuarial practice for Workers’ Compensation Boards in Canada. The liabilities are calculated on a going-concern basis using a discount rate that is determined with reference to the expected long-term return on investments and consideration of other relevant factors. The same methods and assumptions are used to determine expected costs included in the rate setting process.
7. The liabilities recognized in this policy may not agree with the liabilities recognized on the annual financial statement prepared in accordance with International Financial Reporting Standards (IFRS). The Funding and Capital Management note in the audited financial statements provides a reconciliation of WorkSafeNB’s reported financial position and the funding level recognized under this policy.
8. Consideration will be given to impacts on the funding level of any additional liabilities that have been identified since the most recent fiscal year-end.
Funding level target range 115% - 125%
9. WorkSafeNB targets a funding level in the range of 115% to 125%.
10. If WorkSafeNB’s funding level is in the target range of 115% to 125%, annual employer assessment revenue requirements will not be adjusted for funding purposes.
Funding level below 115%
11. If WorkSafeNB’s funding level falls below 115% a surcharge is included in the assessments levied upon employers to return to a 115% funding level over a period not greater than 10 years.
12. In an effort to achieve WorkSafeNB’s rate stability goal, the surcharge will be limited to the greater of $0.35 or the surcharge needed to meet the minimum legislative requirement of reaching a 100% funding level, over a period not greater than 15 years.
13. If the funding level falls below 85%, a clear plan outlining the return to a 100% funding level must be developed and communicated to stakeholders.
Funding level above 125%
14. If WorkSafeNB’s funding level is above 125% a rebate is included in the assessments levied upon employers using the surplus above 125% up to 140%, amortized over a period not greater than 10 years.
15. If WorkSafeNB’s funding level is above 140%, the Board of Directors will undertake, as part of its rate setting process in the following year, a review to assess the amount and the method for surplus distributions.
16. For any surplus above 150%, the Board of Directors will approve a surplus distribution to employers to reduce the funding level to 150%.
17. For the surplus between 140% and 150%, the Board of Directors, at its discretion, may approve a surplus distribution. This distribution must not reduce the funding level below 140%.
When determining a distribution of surplus between 140% and 150%, the Board of Directors will consider a variety of relevant factors including:
Employer assessment rates
18. This policy does not address how assessment rates are set or how experience rating is used to adjust the assessment rates of individual employers, these are addressed in Policy 23- 600 Setting Basic Assessment Rates and Policy 23-605 Experience Rating System.
19. This policy provides direction for the generation and management of the revenue necessary for WorkSafeNB to fulfil benefit obligations to workers and to finance its activities and other obligations under the Workers’ Compensation Act and the administrative costs under the Act and Workplace, Health, Safety and Compensation Commission & Workers’ Compensation Appeals Tribunal Act and the Occupational Health and Safety Act.
Monitoring
20. WorkSafeNB will review this policy at least every five years. These reviews will help ensure the financial sustainability and stability of the workers’ compensation system.
21. Asset liability studies will be performed at least every five years, to ensure asset mix of the investments and long-term financial strategies are aligned with WorkSafeNB’s goals and industry best practice.
Actuary – means a fellow of the Canadian Institute of Actuaries who is either an employee of WorkSafeNB or is an employee of an external firm retained to perform valuations or other functions.
Fully funded – means that WorkSafeNB’s assets are equal to or greater than its total liabilities.
Funding level – means the assets of WorkSafeNB expressed as a percentage of its total liabilities. The calculation of the funding level is performed as at the most recent fiscal year-end on a going-concern basis and is detailed in the Funding and Capital Management note of WorkSafeNB’s annual audited financial statements.
Surplus – means the portion of recognized WorkSafeNB assets above the upper target funding level of 125% as detailed in this policy.