For many years employer organizations, the WCB/WSIB and the Ministry of Labour have claimed the Board is in financial crisis. It is a myth that an “unfunded liability” presents a danger to the viability of the workers’ compensation system, and that improvements to benefits or even cost-of-living adjustments cannot be considered until it is eliminated. Fear and panic about the unfunded liability, however, present a very real threat to injured workers’ livelihoods and the integrity of compensation system.
What is an “unfunded liability”?
An unfunded liability is the difference between projected future costs of all the benefits of all injured workers on the books today for as long as they live and money in the bank now. The WSIB does not need to have all future payments in the bank today. As a mandatory program for employers, based on collective liability (not individual liability), it will always have a funding base for its future costs. One of the reasons it was not established by Meredith as a fully funded system is because employers wanted a plan which allowed them to pay-as-you-go. That was cheaper for them than paying all the long-term costs at once.
The government says its proposals will make the WSIB financially secure. What they actually do is postpone improvements to injured workers benefits until full funding is reached in 2027 while employers continue to pay lower assessment rates than they did 20 years ago and also receive rebates. (In its Nov. 2015 Economic Statement, the WSIB predicts reaching full funding five years earlier than projected and able to lower employers’ rates by another 10-15% in 2022, with a 45% reduction in current rates by 2027… )
Employers’ assessments kept artificially low
Employers have enjoyed generous cuts in their rates since 1996 when the average premium was $3.00 per $100 of payroll. Despite some increases, rates remain at $2.46, or 18% less than the 1995 rate. Yet the WSIB produced a chart for the 2009 Chair’s consultation which demonstrates that if employers’ assessment rates had simply been kept at that 1996 level, by the year 2006 there would have been no unfunded liability.
In August 2014 the WSIB announced that for the second year in a row rates will be frozen. As the Ontario Network of Injured Workers Group asked in its letter to the Minister of Labour (Jul. 17, 2013), how will the Board achieve its goal of 60% funding by 2017? Both the Auditor General and Harry Arthurs, chair of the Board’s 2010-2011 Funding Review , recognized that rate increases are key in covering the costs of the Board.
Although Professor Arthurs emphasized that claims (entitlements) and benefits should not be reduced to achieve the WSIB’s financial target, full funding is indeed being paid for “on the backs of injured workers” – despite the promise government spokesperson MPP Leeana Pendergast made to the Standing Committee on Finance & Economic Affairs (Dec. 6, 2010).
The President’s bonus?
According to a recent Toronto Star article, in WSIB President I. David Marshall’s first five years the unfunded liability shrunk from $14.2 billion to just over $9 billion. In these years 2009 – 2013 annual benefits paid fell 22%. Mr Marshall is making good on his statement to the Legislative Assembly’s Standing Committee on Public Accounts (Feb. 24, 2010) that his plan to achieve full funding will have some tough, tough proposals in it. After all, as he also told the Committee, “I don’t get any bonus unless I can meet this target.” A performance incentive of up to 20% salary to reduce the unfunded liability and improve administrative efficiency was included in the President’s contract, over and above his annual $400,000 salary. This raised legitimate questions on conflict of interest and institutional bias.
In response to persistent criticism of the bonus, the WSIB confirmed that Mr Marshall, re-apppointed to another 2-year term (to Jan. 23, 2017), would not be receiving it and accepted a wage freeze as part of his new contract. (Mr Marshall has since accepted an appointment as adviser to the Minister of Finance, starting Feb. 1, 2016).
- Di Santo. Odoardo. 2014, Jun. 27. “Ontario’s Workers’ Compensation System is Under Attack.” Toronto Star
- Injured Workers’ Consultants. 2013, Jul. 18. Letter to the Minister of Labour: Not On the Backs of Injured Workers. Toronto: IWC
- Thunder Bay & District Injured Workers’ Support Group. 2013, Apr. 3. Presentation to the Standing Committee on Finance and Economic Affairs. Thunder Bay: TB&DIWSG
- Ontario Legal Clinics’ Workers’ Compensation Network. 2012, Jan. 31. Submission on the KPMG Value for Money Audit. Toronto: OLCWCN
- Bright Lights Injured Workers’ Groups. 2011, Nov. 9. Letter to the Premier re the KPMG Report. Toronto: Bright Lights
- IWO Backgrounder. 2010. Workers compensation Finances – Crisis or Smokescreen
- Wilken, David K. 1998. “Manufacturing Crisis in Workers’ Compensation.” Journal of Law and Social Policy 13: 124-165.