2016 Surplus Distribution
At our 2015 year end, the Saskatchewan WCB’s funded position exceeded the 105 to 120 percent funding policy target range. By December 31, 2015, the WCB’s funded position was 144.7 percent resulting in a surplus of $281.5 million. The increase in our 2015 funded position is substantially due to investment income.
Following stakeholder input that included both employer and worker representation, the WCB Board authorized that 100 percent of the total surplus funds ($281.5 million) be distributed to Saskatchewan employers in two instalments in 2016 – $140.75 million in July 2016 and the remaining 50 percent in December.
The Board considered the following factors in order to make its decision: market uncertainties and investment return volatility; funding policy review; cash flow requirements; economic uncertainty; changes in accounting and actuarial standards; and the uncertainty around Committee of Review recommendations.
Firms were eligible for the distribution of the 2015 surplus if their net premiums exceeded their claims costs for the years 2012 to 2014. The surplus amount is being distributed to employers by cheque or credit to their WCB employer account. The first instalment was distributed in July and the final instalment will happen in December.
2016 Surplus Distribution FAQs
Frequently Asked Questions
Q: How is the WCB funded?
A: The WCB is funded through premiums paid by Employers in industries covered under The Workers’ Compensation Act and by investment income. View the list of covered industries by the WCB.
Q: Why are employers getting a distribution?
A: Employers are receiving a distribution because we are over funded according to the WCB’s funding policy. If the WCB’s funded position exceeds 122 percent, a surplus may be distributed back to employers. The increase in our 2015 funded position is substantially due to investment income.
Q: Does this mean that the WCB is collecting more premiums from employers than it should?
A: No. Substantially all of the Injury Fund balance was created as a result of higher than expected investment returns. There are very few years where there have been positive contributions from our insurance operations.
Q : How will the excess surplus be distributed?
A: The WCB is distributing 100 percent of the surplus to employers in two instalments; the first instalment occurred in July, and, the second will be distributed in December. The surplus is being distributed by cheque or credit to their WCB employer account.
Q: How do I know if I will be getting a cheque or a credit?
A: At the time of the distribution, eligible employers whose accounts are current will receive a cheque. Eligible employers with past due accounts with amounts owing from 2015 are only eligible to receive credits.
Q: Will I be notified if I am eligible?
A: Only those who are receiving a portion of the distribution will be notified.
Q: What method will be used to determine how much each employer gets?
A: The distribution will be transparent and is based on a fair and equitable process that is determined by comparing each firm’s premiums paid to the claims costs associated with their firm. Firms will be eligible for the distribution if their net premiums exceeded their claims costs for the years 2012 to 2014. The amount of the distribution is determined based on 2014 base premiums. This is the most current year of assessed actual payroll.
Q: Is the WCB distributing 100 percent of the excess funded position?
A: Yes, the WCB Board is distributing 100 percent of the surplus in two instalments in 2016. When over funded, the WCB funding policy allows up to five years to distribute the excess surplus to employers. At the end of 2015, according to the funding policy, the amount of the Injury Fund in excess of the funding policy is $281.5 million. Of that amount, the Board approved a distribution of $140.75 million or 50 percent of the excess surplus which was distributed in July. The remaining 50 percent will be distributed in December.
Q: How did the Board determine it to be 100 percent?
A: Following stakeholder input from both employers’ and workers’ representation, the WCB Board authorized that the surplus funds in the amount of $281.5 million be distributed to Saskatchewan employers in 2016 in two instalments. The first instalment of 50 percent ($140.75 million) was distributed in July and the remaining 50 percent will be distributed in December. The Board carefully considered the following factors in order to make its decision: market uncertainties and investment return volatility; funding policy review; cash flow requirements; economic uncertainty; changes in accounting and actuarial standards; and the uncertainty around Committee of Review recommendations.
Q: Why isn’t the distribution in 2016 given in one lump sum? Why two payments instead of one?
A: The surplus is substantially a result of investment income and the WCB requires time to liquefy assets into cash in order to minimize the impact on the price received.
Q: What employers are eligible to receive a portion of the excess investment earnings?
A: Employers who were a net contributor to the compensation system over a three year cumulative period (2012 -2014). Net contributions are defined as base premium plus surcharges less discounts less claim costs. Employers also must have had an active WCB account status as of December 31, 2015.
Q: Why was December 31, 2015 chosen as the account status date?
A: The excess funded position was realized during the fiscal year ended December 31, 2015. Employers are required to have an active account as of December 31, 2015.
Q: Why was the period 2012 to 2014 used to determine if an Employer will be eligible to receive an excess investment earnings distribution?
A: 2014 is the most current year that the WCB has completely assessed actual payrolls. A three year period was chosen to ensure employers were not disqualified based on one or two bad years with respect to claim costs.
Q: Are employers that have a bad safety record eligible for this distribution?
A: All employers who were a net contributor (or who have premiums greater than their claims costs) to the compensation system over the three year period from 2012 to 2014 are eligible.
Q: When will the surplus be distributed?
A: The surplus is targeted to be distributed in two instalments – 50 percent in July and the remaining 50 percent at the end of the year.
Q: How often are excess injury funds distributed?
A: There is no set interval for distribution. The last distribution was in 2015 and prior to that the last similar distribution was over 10 years ago.
Q: Can employers expect a distribution every year?
A: No. The funded position is mostly impacted by realized investment earnings which are hard to predict in volatile investment markets.
Q: How come this money isn’t being used to provide better care/top up benefits for injured workers?
A: The Board considered many factors when making its decision and that included both the employers’ and the workers’ perspective. Also, workers’ benefits are determined by legislation. The Workers’ Compensation Act, 2013 increased the maximum wage rate for workers.
Q: Why have not some of the funds been redirected to prevention initiatives?
A: The Board considered many factors when making its decision and that included both the employers’ and the workers’ perspective. Prevention initiatives are managed through the strategic planning and operational planning processes and funded through operational budgets. Safety Associations also can request funding from their member employers which is reflected in the premiums charged to the employers belonging to that safety association.
Q: Is the surplus income distribution taxable?
A: Yes, the distribution would act as a reduction of the WCB premium expense, which was previously deducted from your taxable income.
Q: What formula was used to determine my distribution amount?
A: We determine the distribution amount by dividing an firm’s base premiums in 2014 (based on the industry rate, before discounts or surcharges are applied) by the 2014 total base premiums of all eligible employers. We then multiply this by the $140.75 million surplus amount to get the firm’s distribution amount.