Law Times

Law times • OctOber 17, 2011 FOCUS PAGE 11 Employers nervous about WSIB funding review Exercise aims to find solutions to board's ongoing financial woes BY JUDY VAN RHIJN For Law Times the Workplace Safety and In- surance Board's funding struc- ture that's currently underway is causing sleepless nights for employers and their advisers. A move to a fully funded model may ensure the long- term fi nancial viability of the system, but it will have a sig- nifi cant impact on employers in the not-so-distant future. Th e review comes as the WSIB re- ports that over the last 25 years, its revenue has been less than the cost of funding the system. In 2009, for example, WSIB expenses were $5.3 billion and revenue was $3.2 billion. At the same time, the WSIB's unfunded W projected for future — the diff erence between pay- ments benefi ts liability to workers and funding received from businesses — has risen due to increasing claims and health- care costs as well as declining investment returns following the recent recession. In fact, the un- funded liability was $12 billion in March 2010, up signifi cantly from $6 billion in 2006. Fore- casts project that it could rise to $14 billion over the next three years before it begins to decrease. In response, the WSIB has announced an independent third-party review chaired by Osgoode Hall Law School professor Harry Arthurs. Th e consultation portion of the re- view is expected to conclude in November with a report issued in January. In the meantime, amend- ments made via Bill 135 re- moved the requirement for the WSIB to maintain a reserve fund. Instead, it will have to maintain an insurance fund suffi cient to meet the require- ments. In implementing these changes, it can't unduly or unfairly burden any class of Schedule 1 employers. Stephen Roberts of McTague Law Firm LLP, who has penned the Employers' Advocacy Coun- cil submission to the review, says the goal of full funding has the support of employers. "Every other province's board is man- dated to set rates at full funding so that their revenue matches hile they're sup- portive of the exer- cise, the review of their obligations," he says. "On- tario has only 54-per-cent fund- ing from employer premiums and from investment returns on the money it holds in reserve." Roberts adds that there are real concerns about the WSIB's fi nancial situation. "Th e gov- ernment runs in defi cit, but there's a recognition you can't do that forever," he notes. "Th e other provinces think full funding is a good idea and are able to do it. Why shouldn't Ontario be able to do it?" Th e employers Roberts repre- sents are in favour of full fund- ing. "Th ey recognize that it's not fi scally responsible for the WSIB to carry on the way it has been carrying on," he says. "Employ- ers also fully recognize that the only way to achieve full funding is to increase premiums, reduce benefi ts, and reduce expenses. Th e balance sheet is simple. Pre- miums will have to increase and 'The government runs in defi- cit, but there's a recognition you can't do that forever,' says Stephen Roberts. the board needs to be adminis- tered in a better and more eco- nomical way." Th e largest obligation on the balance sheet is for future loss of earnings, as represented by the unfunded liability. "A few years ago, there was a plan to wipe out the [unfunded liability] by 2014 and they had got it down to $6 billion," Roberts recalls. "Between the economy taking a tremendous hit and some other factors, it got reversed." Roberts estimates that right now, approximately $1 of the $2.39 premium goes to paying interest on the debt. "At pres- ent, premiums in Ontario are by far the highest in Canada because there is not full fund- ing and there are high debt costs. Employers know there will be short-term pain, but if we get our house in order, pre- miums could come down." Th e review will consider sever- al areas, including administrative effi ciencies, case management, investments, premium increases, the current rate-group model, and a timeline for eliminating the unfunded liability. It will also ex- amine the various employer rat- ing schemes and the secondary injury enhancement fund (SIEF) that provides a fi nancial incentive for businesses to hire workers with a pre-existing disability. "Th ere is an acknowledgment that the pre- existing injury may have caused the current injury or prolonged the recovery," Roberts says. "Th e employer doesn't get assessed with costs for experience rating purposes. Th e board feels they are giving out too much SIEF and worker organizations are against costs relief for employ- ers all together." Th rough consultation and consideration of alternatives, the goal of the funding review is to identify the best path to follow. Th ere will also be an au- dit in terms of value for money of adjudication and claims ad- ministration to inform the rec- ommendations. Untitled-2 1 www.lawtimesnews.com 11-10-11 8:44 AM

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