As of 2016, eight out of 12 workers’ compensation boards in Canada are overfunded, depriving employers of billions of dollars that could otherwise be used to invest in their businesses, create jobs and improve wages and worker safety, according to a report by the Canadian Federation of Independent Business (CFIB).
“Boards are holding onto $6.8 billion in extra money. Typically, when you overpay your taxes, you get a refund. It’s time boards give that refund. There is no shortage of great ways it could be put to work in a business, including investing in staff,” said Laura Jones, executive vice-president and chief strategic officer at CFIB. “The bottom line is that overcharging employers is unfair, unproductive and unnecessary.”
In Canada, workers’ compensation insurance is entirely funded through mandatory employer premiums and investment earnings. The funding position of a board is typically measured as the ratio between a board’s total assets and liabilities. The report recommends a funding ratio of between 100 per cent and 110 per cent, meaning a board in excess of 110 per cent is over-funded. A 10 per cent cushion is more than sufficient to protect against the premium volatility — five boards already target this range, said the CFIB.
For boards that are overfunded, the funding ratio ranges from a low of 112 per cent in New Brunswick to a high of 159 per cent in Prince Edward Island. Seven of the 12 boards do have rebate policies in place, but these are triggered at the discretion of the board and are only exercised well beyond the 110 ratio, said the report.
“While some might view the boards as being prudent, it’s important to remember that the source of funding for workers’ compensation comes solely from employers. It’s easy to be overly cautious with someone else’s money. So when a board has excess money, it’s only fair to return the extra funds to employers,” said Marvin Cruz, senior research analyst and author of the report.
To bring overfunded positions back in line, the report recommends boards issue surplus rebates directly to employers, or lower premiums once the 110 per cent threshold is exceeded. For a business with five employees, the rebate would range from $500 in New Brunswick to $8,165 in British Columbia.
“This is a pretty straightforward policy. We aren’t asking governments to spend more money, just to give back the excess they’ve taken,” said Jones.