Safety Achievement Financial Incentive System (SAFIS) Policy 23-610 | Effective Date: October 23, 2019

Purpose

The purpose of this policy is to describe the operation of the Safety Achievement Financial Incentive System (SAFIS).

Scope

This policy applies to:

• Employers covered under Part 1 of the WC Act, who meet the participation criteria indicated in section 1.1, and who elect to participate in SAFIS.

Statements

1.0 Program Objectives

WorkSafeNB includes in its strategic goals a decline in accident frequency. To support this goal, programs are developed to increase accountability and to provide incentives for employers to practice prevention and post-injury management.

WorkSafeNB’s Experience Rating System, described in Policy 23-605 Experience Rating System, increases the accountability of experience-rated employers for their individual claim costs while providing a financial incentive for employers to practice prevention and post-injury management.

The objective of the Safety Achievement Financial Incentive System (SAFIS) is to further increase the financial incentive for prevention and post-injury management among those employers who are most likely to be in a position to shoulder the responsibilities and risks of such a system.

The incentive available under SAFIS is intended to react more quickly, and be more visible, than incentives available under WorkSafeNB’s Experience Rating System.

Under SAFIS, refunds and surcharges are based on a comparison of an employer’s actual claim costs to a schedule of anticipated claim costs developed as part of the establishment of the employer’s regular assessment rate.

Participation in this program is on a voluntary basis for those employers meeting the participation criteria indicated below.

This program does not suspend any provision of the Workplace Health, Safety and Compensation Commission & WCAT Act, the Workers’ Compensation Act or the Occupational Health and Safety Act respecting those employers who elect to participate in SAFIS.

1.1 Conditions for Entry into SAFIS

In order to become a participant in SAFIS, an employer must submit an application in writing and must meet all of the following conditions:

• Average yearly assessment premiums excluding experience rating rebates and surcharges, are $500,000 or more in the three calendar years prior to entry;
• An audit score of a minimum of 30% and a commitment to increasing that score to at least 70%;
• Has a disability management program which includes a return-to-work component;
• Has arranged to make assessment payments through WorkSafeNB’s Monthly Assessment on Actual Payroll (MAAP) system;
• Is registered as an assessed employer;
• Has a stable, long-term operation with permanent facilities in New Brunswick for at least 5 years;
• Has paid or has made provision to pay any entry deficit described in section 1.3; and
• Has confirmed in writing, to WorkSafeNB, that the terms of this policy are acceptable.

An employer who meets the above criteria and wishes to participate in the program must make its request in writing prior to November 1st of the year preceding the first year of participation.

In cases where an employer has more than one operation in a similar business registered with WorkSafeNB, for the purposes of SAFIS, all operations will be combined into one group. The experience of all operations will be combined, and the group will be treated as one employer under SAFIS.

1.2 Criteria for Assessment Rebates or Withdrawals

This program is designed to increase employer accountability by providing assessment rebates to employers having better than expected results, and by generating surcharges for employers having worse than expected results.

In order to be eligible for assessment rebates or withdrawals other than for investments in safety and/or return-to-work initiatives, the employer must, to the satisfaction of WorkSafeNB, comply with all of the following conditions:

• The employer has put a process in place for improving health and safety, and has a return to work strategy, which is verifiable using the audit protocol;
• The employer has met its commitment for increasing its audit score;
• The employer has addressed audit recommendations to the satisfaction of WorkSafeNB;
• The employer has maintained its accounts in good standing including prompt payment of assessments and any surcharges under this policy, over the previous three years, or since joining the SAFIS program, if shorter;
• There is no evidence that the employer has arranged its affairs to artificially reduce claim costs taken into account under this policy;
• There is no evidence of undue pressure on workers to return to work before they are able;
• The employer has not been convicted under the Criminal Code, as a result of a workplace fatality, in the previous calendar year;
• The employer has satisfied any request for additional security described in section 1.9; and
• The employer has made any necessary payment on termination of participation described in section 1.8.

In addition, where an employer has had an increase or decrease in payroll in any single year in the previous five years of more than 25%, and WorkSafeNB believes that this may significantly impact the adequacy of the assessment rate charged, WorkSafeNB may reduce or defer any assessment rebates or withdrawals normally available.            

1.3 Program Entry Deficit

WorkSafeNB’s current assessment system is based primarily on average costs over five years. As a result, assessment rates respond gradually to changes in claims experience.

This means that an employer whose accident experience deteriorates pays an assessment that is not adequate to cover its claim costs, leading to a deficit in the accident fund.

Assuming the employer’s accident experience later improves and the employer pays an assessment that is more than adequate to cover its claim costs, the deficit may be recovered.

However, if the employer becomes covered under SAFIS, improvements in accident experience will result in refunds, instead of being used to recover the deficit. As a result, new entrants to SAFIS are required to cover any deficit arising from the previous five years upon entry into the system.

The deficit is calculated by retroactively applying the provisions of this policy to the previous five accident years and calculating the balance of the refund stabilization account on the assumption that no assessment rebates were granted and no surcharges were paid.

If a negative balance results, such amount is due prior to admission to SAFIS. Furthermore, the accident years in question are covered under SAFIS.

1.4 Refund Stabilization Account

An account, called the refund stabilization account, is set up for each participating employer. If applicable, the initial account balance will include the entry deficit owed, as outlined in section 1.3. The employer is required to pay this deficit upon entry into the SAFIS program, to bring their account in good standing.

This account will help to stabilize the assessment rebates or surcharges that might result from the program.

1.5 Refund & Surcharge Process            

Participating employers may be eligible for refunds or responsible for surcharges.

In order to establish the amount of any refund or surcharge, each participating employer is given a claim costs schedule, for each accident year, which is developed as described in section 1.6.

At the end of the year of accident and at the end of each of the following seven years, actual claim costs are compared to the entries on the schedule and a refund or surcharge is calculated as follows:

• If actual claim costs are less than those anticipated by the schedule, the employer is eligible for a refund equal to 100% of the difference; or
• If actual claim costs are greater than those anticipated by the schedule, the employer is responsible for a surcharge equal to 100% of the difference, limited by the following:
• The claim costs charged in respect of any particular accident year cannot exceed the maximum described in section 1.7.

At the end of the seventh year following the year of accident, the accident year is “closed” and a refund or surcharge is calculated as follows:

• A provision for anticipated future cost of claims is calculated using methodologies and assumptions that are consistent with those used for assessed employers in general. This provision includes an amount to meet WorkSafeNB’s funding goal at the time of the calculation, as described in Policy 37-100 – Long Term Fiscal Strategy. WorkSafeNB is solely responsible for determining the provision for anticipated future cost of claims;

• This provision is compared against the “residual amount” in the claim costs schedule described in section 1.6. If this provision is less than the residual amount in the claim costs schedule, the employer is eligible for a refund equal to the difference; and

• If this provision is greater than the residual amount in the claim costs schedule, the employer is responsible for a surcharge equal to the difference, limited by the following:

- The claim costs including the provision charged with respect to any particular accident year cannot exceed the maximum described in section 1.7.

In the event of a retroactive adjustment, such as a cost relief decision or an Appeals Tribunal decision, the claim cost adjustment will be reflected in the year the decision was processed.

Beyond the end of the seventh year following the year of accident, additional claim costs and retroactive claim decisions have no impact on refunds or surcharges calculated under SAFIS.

At the end of each calendar year, refunds and surcharges for all accident years are combined together in order to determine the overall refund or overall surcharge for a participating employer.

1.6 Claim Costs Schedule

The claim costs schedule is intended to represent the expected claim costs corresponding to the assessment paid by the participating employer. WorkSafeNB is solely responsible for determining the claim costs schedule.

The schedule includes an amount for the accident year and each of the seven following years. In addition, the schedule includes a residual amount intended to cover the discounted value of all future claim costs beyond seven years.

The schedule includes a provision for only those costs that are likely to be charged to the employer under the refund/surcharge process.

The assessments paid by the employer, less the cost of administering the program, any charges for administration expenses, and any other items normally shared by all assessed employers, taken together with any interest earned on these funds prior to their expected disbursement date, are exactly enough to provide for the amounts in the claim costs schedule. Interest is calculated at the valuation rate of interest.

The pattern of costs in the schedule is derived from the historical pattern observed for all assessed employers.

The assessments taken into account in developing the claim costs schedule are regular assessments, including the impact of experience rating in accordance with Policy 23-605 Experience Rating System, and including any assessments paid in respect of workers of sub-contractors considered to be workers of the principal under subsection 70(3) of the WC Act, but excluding assessments collected for Safety Associations. Any adjustments to assessments as a result of revisions to payroll or assessment rates result in adjustments to the schedule and previous year’s refund stabilization account balance.

Legislative or policy amendments that change the future benefits for past claims have an impact on WorkSafeNB’s financial position. When this occurs, adjustments may be required to ensure that actual claim costs included in SAFIS are consistent with expected costs reflected in the schedule.

1.7 Maximum Claim Costs

SAFIS participants maintain a certain level of protection against larger claim costs through the application of claim cost maximums. The maximum is applied on a cumulative basis such that participants with similar claim cost totals feel a similar impact on long-term results no matter the relative severity of the individual claims or the timing of payments.

Under normal circumstances, the cumulative total amount of claim costs, including the provision for anticipated future costs, taken into account with respect to a particular accident year, cannot exceed two times the cumulative total on the claim costs schedule, including the residual amount.

In certain circumstances, for example, where the employer has recently had a very large change in volume or type of business, a cumulative limit of two times may not be appropriate. In these circumstances, the Director of Fiscal and Economic Planning must recommend an appropriate limit and submit it to the Board of Directors for approval.

1.8 Program Termination Provisions

If an employer is unwilling or unable to continue to participate in SAFIS for whatever reason, the following provisions apply:

• Notice must be given in writing to WorkSafeNB by November 1st in order to stop participation on January 1st of the following year;
• All accident years covered under SAFIS continue to be covered until the end of the seventh year following the year of accident;

• Upon termination, the refund stabilization account balance must meet or exceed the sum of all refunds and surcharges to which the employer became entitled in the previous five years including the rate of return on WorkSafeNB’s investment portfolio. If the refund stabilization account balance does not meet this minimum requirement, an additional deposit must be made within 30 days of notice of payment. Thereafter, it will be considered overdue, and overdue interest will be charged in accordance with Policy 21-040 – Interest on Claim-related Benefits & Employer Accounts; and

• Any remaining balance after the last accident year has been closed is available either as a rebate against the future assessments of the participating employer if the balance is positive, or due from the employer, if negative.

If WorkSafeNB decides to terminate SAFIS or to no longer allow a particular employer to participate in SAFIS, the following provisions apply

• Notice must be given in writing by WorkSafeNB by November 1st in order to stop participation on January 1st of the following year;
• All accident years covered under SAFIS continue to be covered until the end of the seventh year following the year of accident; and
• Any remaining balance after the last accident year has been closed is available as a rebate against the future assessments of the participating employer, if the balance is positive, or due from the employer, if negative.              

If, after applying a rebate to assessments for twelve successive months, a balance remains, that balance is payable to the participating employer.

If the participating employer cannot be located within six months, the balance is transferred to WorkSafeNB’s Accident Fund and the participating employer no longer has a claim on this balance.

1.9 Additional Security

In circumstances where WorkSafeNB believes that the participating employer may not be in a position to pay future surcharges, WorkSafeNB may request any additional security it deems satisfactory.

2.0 Rebates, Withdrawals & Surcharges

A participating employer may receive an assessment rebate calculated as a portion of an annual overall refund, and may make withdrawals from the refund stabilization account.  A participating employer is required to pay a portion of any overall surcharge as provided in section 2.4.

2.1 Assessment Rebates

A portion of an annual overall refund under SAFIS is available for payment as a rebate against future assessments of the participating employer provided the employer meets the conditions outlined in section 1.2.       

The portion available as a rebate against future assessments is determined as follows:

• No amount is available as a rebate until the balance in the refund stabilization account has reached a minimum of 25% of the assessments due with respect to the calendar year for which the overall refund was calculated; and
• Once the minimum is reached, 25% of any remaining overall refund is available as a rebate.

Any remaining overall refund is credited to the refund stabilization account.

2.2 Withdrawals

A participating employer may withdraw up to 25% of the year-end balance of the refund stabilization account, for the purpose of making investments in safety and/or return-to-work programs above the minimum standards outlined in the Occupational Health and Safety Act and regulations, provided the investments are endorsed by the participating employer’s Joint Health and Safety Committee and approved by WorkSafeNB.

A participating employer may withdraw an additional 25% of the year-end balance of the refund stabilization account provided the employer meets the conditions outlined in section 1.2. This amount may be applied against future assessments.

A participating employer may withdraw any portion of the year-end balance of the refund stabilization account not already available for withdrawal which exceeds the employer’s average assessments over the previous 10 years, provided the employer meets the conditions outlined in section 1.2. This amount may be applied against future assessments.

Withdrawals from the refund stabilization account are not subject to the minimum account balance mentioned in section 2.1.

2.3 Rate of Return

WorkSafeNB applies a rate of return on funds held in the refund stabilization account. This rate of return is the annual rate of return on WorkSafeNB’s investment portfolio and may be positive or negative.

2.4 Surcharges

If an overall surcharge is payable, up to 75% of the overall surcharge may be charged to the refund stabilization account provided this does not reduce the account balance below the minimum account balance mentioned in section 2.1.  

The remainder of the overall surcharge must be paid within 30 days of notice of payment. Thereafter, it will be considered overdue, and overdue interest will be charged in accordance with Policy 21-040 - Interest on Claim-related Benefits & Employer Accounts.