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Elimination of the UFL and long-term financial sustainability

Background

In 2009, the Auditor General of Ontario said that failure to control and eliminate the Unfunded Liability could result in the WSIB being unable to meet our financial commitments to provide services and support to people injured on the job.

In 2010, we engaged in an intensive study chaired by Professor Harry W. Arthurs to identify the drivers of the Unfunded Liability. In 2012, Arthurs published Funding Fairness: A Report on Ontario’s Workplace Safety and Insurance System (PDF).

In 2012, the Ontario government passed a regulation requiring the WSIB to be 100 per cent funded on December 31, 2027.

The WSIB put together a roadmap to achieving legislated funding requirements, known as the Sufficiency Plan.

Eliminating the UFL

After reaching a high of $14.2 billion in 2011, we have now eliminated our Unfunded Liability (UFL) almost 10 years ahead of the legislated deadline of December 31, 2027. The UFL was the difference between the money needed to pay future benefits to people injured at work for all established claims, and the money that was in the insurance fund. Now that it has been eliminated, we are reporting a slight reserve ($653 million on a Sufficiency Ratio basis) and a Sufficiency Ratio over 100 per cent (102 per cent) for the first time in recorded history.

After reaching a high of $14.2 billion in 2011, we have now eliminated our Unfunded Liability (UFL) almost 10 years ahead of the legislated deadline of December 31, 2027. The UFL was the difference between the money needed to pay future benefits to people injured at work for all established claims, and the money that was in the insurance fund. Now that it has been eliminated, we are reporting a slight reserve ($653 million on a Sufficiency Ratio basis) and a Sufficiency Ratio over 100 per cent (102 per cent) for the first time in recorded history. We have achieved this historic milestone in partnership with businesses through the component of premiums (known as the “past claims cost” or PCC) collected to help eliminate the UFL and through our ongoing positive investment and operational performance. Other factors that contributed to the elimination of the UFL included:  improvements in claim duration, and a decrease in lost-time injuries (due to New Claims Costs (NCC) pricing margins).

We have achieved this historic milestone in partnership with businesses through the component of premiums (known as the “past claims cost” or PCC) collected to help eliminate the UFL and through our ongoing positive investment and operational performance.

The elimination of the UFL safeguards Ontario’s workplace health and safety system. It means that people who are hurt or become ill as the result of their work can have confidence we will be here to help them now, and into the future.

It also means that Ontario businesses, who have been contributing significantly to paying down the burden of the UFL, are in line for significant average premium rate reductions in 2019.

Frequently Asked Questions

Now that the Unfunded Liability has been eliminated, what’s next?

Eliminating the UFL was a necessary step to secure the future of our programs and services, and to make them better.

With the UFL out of the way, the WSIB can now begin to pursue an ambitious agenda to improve outcomes, services and technology. In the near term, average premium rates for businesses should decrease by almost 30 per cent in 2019, as we phase out the charge (PCC) that was used to help pay off the UFL.

Looking farther ahead, our 2019-2021 Strategic Plan sets out a bold vision to make Ontario the safest and healthiest place to work and set the standard for outcomes in recovery, return to work, occupational health care and claims decision-making.

Now that you’ve reached over 100 per cent funding, what is your target funding level?

Over the next two years our focus will be on transitioning to the rate framework and adjusting premium rates to reduce costs for businesses and ensure they are paying rates that are more reflective of their experience. Once in the new rate-setting world, we will shift our focus to define a target funding level that safeguards our financial sustainability into the future.

Now that the Unfunded Liability has been eliminated, what is going to happen to the past claims cost portion of premium rates?

We will gradually phase out the PCC, starting with a 29.8 per cent reduction to the average premium rate in 2019. The 2019 average premium rate will decrease by 29.8 per cent from $2.35 to $1.65.

Now that the Unfunded Liability has been eliminated, why isn’t the entire PCC being removed immediately?

The PCC was significantly reduced for 2019 premium rates, however it is not financially prudent to release the PCC in just one year. For this reason the PCC will be phased out over time.

What will the phase out of the past claims cost look like?

We must consider our funding position and other changes to the economic environment before we can commit to the specifics of what this phase out will look like.

After implementing the 29.8 per cent reduction to the average premium rate in 2019, our focus will be on transitioning to the new rate framework and adjusting premium rates to ensure businesses are paying rates that are more reflective of their experience.

How many rate groups are receiving a reduction in their 2019 Premium Rates?

There are 148 rate groups that will receive a decrease for 2019 (compared to 76 last year) with seven that will remain at 2018 levels. None will have an increase.

What is the breakdown of the 29.8 per cent reduction in the average premium rate? Specifically, what portion is going towards retiring the UFL and what portion is going to administrative costs?

New Claim Cost: $0.91 (55.2%)
Administration Expenses: $0.52 (31.5%)
Past Claims Cost (i.e. UFL): $0.22 (13.3%)
Total - $1.65

Note: the decrease of 29.8% represents a reduction on the past claims cost of 75.6%, no change in the admin expense and a 2.2% decrease in the new claim cost.

Now that the UFL has been eliminated, will businesses leaving Schedule 1 for Schedule 2 still be required to pay a Departure premium, in order to pay for their share of the UFL?

No, businesses leaving Schedule 1 for Schedule 2 will no longer be required to pay a Departure premium.

You’ve announced premium rate reductions for businesses resulting from the phase out of the PCC. Will you also be increasing benefits to people injured at work?

The Ontario government determines the benefits for people injured at work – not the WSIB. We continue to make investments to better serve you, whether it is:

    • Improving return-to-work and recovery outcomes
    • Improving customer service, or
    • Launching new tools to help businesses improve their safety.

Benefits for people with workplace injuries and illnesses actually have increased as led by the Ontario government. Starting on January 1, 2018, we began providing support and compensation for those who experience work-related Chronic Mental Stress (CMS).

In addition, this past May, the government expanded the list of occupations covered by the PTSD presumption to include six additional roles. of June 30, 2018 we added $12 million to our liability as a result of this change in legislation.

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