Cost-cutting or crisis?

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 cannot be considered until it is eliminated.

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 it will always have a funding base for its future costs. As employers told Meredith, rather than a fully funded system they 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 strategy will make the WSIB financially secure. In its 2017 Economic Statement the Board predicts it will eliminate the unfunded liability by 2020, seven years earlier than its original target. How has this been achieved when employers continue to pay lower assessment rates than they did 20 years ago?

Employers’ rates kept artificially low

In September 2019 the Ford government announced elimination of the unfunded liability charge starting January 1, 2020. This followed cuts to the average premium rate paid by employers of almost 30%, starting January 1, 2019; a reduction in 2017 of the average assessment rate by 6.2%, and a further 3.3% cut in 2018. Employers have enjoyed generous cuts in their rates since 1996 when the average premium was $3.00 per $100 of payroll. In 2009 the WSIB produced a chart for the Chair’s consultation which shows that if employers’ assessment rates had simply been kept at that 1996 level, by the year 2006 there would have been no unfunded liability.

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, claims denials and cuts to injured workers’ compensation and services show that 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).