Excess Surplus Distribution 2017-05-08T11:33:48+00:00

Excess Surplus Distribution

 

If you have questions or concerns about the excess surplus distribution, please contact us.

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The WCB is funded solely through premiums charged to employers as well as investment earnings. Premiums are set by industry code based on claims costs, injury rates and payroll volumes. The funds collected through employer premiums are then used to cover injured worker claims including wage loss, and physical and vocational rehabilitation as well as prevention initiatives. WCB has an investment portfolio that performed well in 2014 resulting in positive investment earnings. The WCB funding policy targets a funding position of 105 -120 per cent. By December 31, 2014 our funding, due to positive investment returns, grew to 132.2 per cent. This means that we are currently overfunded. As a result, the WCB Board has approved the distribution of excess investment earnings to employers. Initially, the Board had announced that $78.9 million of the excess investment surplus would be distributed. However after seeking feedback from employers and other key stakeholders at the WCB’s AGM in May and following a consultation period and further analysis, the Board approved a distribution of the amount of funds in excess of the top range (120%) of the WCB’s funding policy. The amount of the excess surplus above the funding policy maximum is estimated at $141 million. This excess surplus is the result of good investment returns. This amount ($141 million) will be distributed to employers by cheque or credit to their WCB employer account in summer 2015. Firms will be eligible for the distribution if their net premiums exceeded their claims costs in 2011 to 2013. The amount of the distribution is determined based on 2013 base premiums.

Questions & Answers

Q: How is 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 WCB.

Q: Why are employers getting a distribution in 2015?

A: Employers are receiving a distribution in 2015 because we are overfunded according to policy. At the end of 2014, the WCB’s funding position was 132.2 per cent. The increase in our funded position is a result of positive investment returns to the end of 2014. The WCB funding policy targets our funding position to be 105 to 120 per cent. Initially, the Board had announced that $78.9 million of the excess investment surplus would be distributed. However, after seeking feedback from employers and other key stakeholders at the WCB’s AGM in May, and following a consultation period and further analysis from an Asset/Liability study, the Board approved a distribution of the amount of funds in excess of the top range (120%) of the WCB’s funding policy. The amount of the excess surplus above the funding policy is $141 million. This excess surplus is the result of good investment returns. Our funded position is represented on our financial statements as the Injury Fund. The Injury Fund is an accumulation of our net income (WCB’s total earnings minus expenses) from past years.

Q: Does this mean that the WCB is taking 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 surplus in excess of the funding policy be distributed?

A: The Board approved a distribution of excess investment earnings in 2015 of $141 million to employers. This amount will be distributed to employers by cheque or credit to their WCB employer account in summer 2015. Firms will be eligible for the distribution if their net premiums exceeded their claims costs in 2011 to 2013. The amount of the distribution is determined based on 2013 base premiums.

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 if their distribution is greater than $300.   Eligible employers who owe WCB on their account will receive a credit. All distributions less than $300 will be processed as a credit on the employer account.

Q: Will I be notified if I am eligible?

A: Only those who are receiving a portion of the distribution will be notified.

Q: Will the surplus in excess of the funding policy be fairly distributed? What method will be used to determine how much each employer gets?

A: Yes, the distribution will be transparent and is based on a fair and equitable process that is determined by how employers’ fund WCB’s insurance activity through the premiums they pay. Firms will be eligible for the distribution if their net premiums exceeded their claims costs in 2011 to 2013. The amount of the distribution is determined based on 2013 base premiums. This is the most current year of assessed actual payroll.

Q: Are you distributing 100% of the excess funded position?

A: Yes, Initially, the Board had announced that $78.9 million of the excess investment surplus would be distributed. However after seeking feedback from employers and other key stakeholders at the WCB’s AGM in May and following a consultation period and further analysis, the Board approved a distribution of the amount of funds in excess of the top range (120%) of the WCB’s funding policy. The amount of the excess surplus above the funding policy is $141 million.

Q: Why did the Board announce 55 per cent ($78.9 million) would be distributed and then change it to 100 per cent ($141 million)? Shouldn’t it have been the full 100 per cent from the beginning?

A: Initially, the Board had announced that $78.9 million of the excess investment surplus would be distributed. $78.9 million is the amount quantified by our actuaries as investment income attributable to investment income in excess of WCB’s discount rate and investment income on WCB reserve balances.

The Board’s initial decision allowed for more time for the WCB to evaluate and adjust for future uncertainties including economic impacts (such as a drop in oil prices) on assessable payroll, longer term asset returns expectations trending downward and future claims cost trends. However after seeking feedback from employers and other key stakeholders at the WCB’s AGM in May and following a consultation period, the Board approved a distribution of the amount of funds in excess of the top range (120%) of the WCB’s funding policy. The amount of the excess surplus above the funding policy is $141 million.

Q: What employers are eligible to receive a portion of the surplus distribution?

A: Employers who were a net contributor to the compensation system over a three year cumulative period (2011 -2013). Net contributions are defined as base premium plus surcharges less discounts less claim costs. Employer also must have an active status as of December 31, 2014.

Q: What formula was used to determine my distribution amount?

A: We determine the distribution amount by dividing your base premiums in 2013 (based on the industry rate, before discounts or surcharges are applied) by the total base premiums of all eligible employers in 2013. Then we multiply this amount by the $141 Million available for the excess distribution.

Q: Why was December 31, 2014 chosen as the account status date?

A: The excess funded positon was realized during the fiscal year ended December 31, 2014. Employers are required to have an active account as of December 31, 2014.

Q: Why was the period 2011 to 2013 used to determine if an Employer will be eligible to receive an excess investment earnings distribution?

A: 2013 is the most current year that 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 2011 to 2013 are eligible.

Q: When will the excess surplus be distributed? How come it will take so long to distribute these funds?

A: The excess surplus is targeted to be distributed in summer 2015.

In order for this process to be fully transparent, fair and equitable, we are required to create a process that ensures complete accuracy of this distribution. It required time to plan and implement the new distribution process.

Q: How often are excess injury funds (surplus) distributed?

A: The last similar distribution was over 10 years ago. There is no set interval for distribution. The funded position is calculated annually and will trigger a consideration of distribution.

Q: Have excess injury funds (surplus) been distributed before?

A: Yes, the last distribution was in 2001 based on the 2000 funded position and the funding policy at that time.

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: 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: 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 will act as a reimbursement of the WCB premium expense, which was previously deducted from your taxable income.

If you have questions or concerns about the excess surplus distribution, please contact us.

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