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Construction debates WSIB premium rates

Richard Gilbert
Construction debates WSIB premium rates

Ontario construction leaders have differing views about the need for Workplace Safety and Insurance Board (WSIB) to reduce premium rates and the factors contributing to the current decline in employer debt.

"From an employer’s perspective, no rate increases across the board, is good news. I think employers in general will receive this news happily," said Ian Cunningham, president of the Council of Ontario Construction Associations.

"The fact of the matter is that over the last few years, the WSIB has been doing across the board increases or freezes, but they have not been recalculating rates across each group."

The WSIB announced recently that premium rates will be maintained at current levels for the majority of employers in 2015, which is the second consecutive year rates have been maintained at current levels.

According to a WSIB report published in June, strong operating results in the first quarter of 2014 generated $717 million in total comprehensive income. This increase was driven by growth in premium revenues and improved return to work outcomes, which reduced benefit payments and administrative expenses.

The increased total income in 2014 resulted in a corresponding decline in the unfunded liability by $629 million (5.9 per cent) to $10.9 billion in March 2014. This represents a $400 million decrease since the beginning of the year.

The unfunded liability is defined as the extent to which the WSIB’s liabilities (the cost of paying for awarded claims, administering the system and meeting other responsibilities) exceed its assets (the cash, investments and other resources it has available to meet that cost).

Some construction leaders argue the improvement in the unfunded liability means employers are being overcharged for the provision of benefits.

"The WSIB’s situation is improving significantly. They are not out of the hot water yet, but they are paying down their unfunded liability quite rapidly," said Patrick McManus, spokesperson with the Ontario Sewer and Watermain Construction Association.

"We have approached that time when we are not excited about not having our rates increase. We really want a return to those days when performance matches what you pay."

Others agree.

"Now that the system has been righted and it is performing the way it is and exceeding expectations in terms of paying down the unfunded liability, let’s go to target rates for 2016," said David Frame, director of government relations with the Ontario General Contractors Association. "That will allow the rates of those who have been over-performing to go down."

Cunningham says this request is understandable, but argues a more disciplined approach to eliminating the unfunded liability is needed. He says employers should wait until the debt is paid before enjoying a large reduction in their rates.

Results for the first quarter of 2014 show the system is progressing steadily toward meeting financial requirements set by the Ontario government in 2012. This legislation requires the WSIB to increase sufficiency ratios, the ratio of assets to liabilities, to 60 per cent by 2017, 80 per cent by 2022 and 100 per cent by 2027.

The recent reduction in the unfunded liability caused a corresponding increase in the sufficiency ratio to 67.7 per cent as of March 31, 2014 from 65.4 per cent on Dec. 31, 2013.

In sharp contrast to this view, one construction leader is not pleased with the rate freeze.

Patrick Dillon, business manager of the Provincial Building and Construction Trades Council of Ontario says high premium rates are only indicative of the fact employers have not been paying their proper share in the workers compensation system for many years, which is the real cause of the employer debt.

"WSIB and the employers argue that the costs have gone down on benefits, but the one cost that has not gone down is the debt," he said. "The unfunded liability is 100 per cent an underfunding by employers to the responsibility of the major contract that created the compensation system in the province of Ontario, that the employers would pay and the workers would be compensated."

A report produced for WSIB by Harry Arthurs in 2012, said the unfunded liability was estimated to be $12.4 billion in 2011. But, a more realistic estimate put the employer debt at about $14.5 billion.

Both Frame and Dillon agree that the unfunded liability is being placed on the shoulders of future employers and not on the employers that accumulated the debt.

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