About the Rebates
What are the rebates?
The rebates are a method for distributing to employers a portion of the Compensation Fund’s reserves that have accrued to a surplus level over several years.
The first rebate was distributed in November 2015, the second in December 2016, the third in December 2017 and the fourth in December 2018.
Why are you giving money back if you’re raising rates?
Rate increases are, in fact, a direct and natural consequence of rebates.
When there is a surplus in our Compensation Fund, our funding policy requires us to reduce rates through subsidies. As the surplus is reduced, there is less money to subsidize rates. As a result, rates go up.
What do you mean by “surplus”?
To answer this question, we’ll have to first provide some background information.
The Workers’ Compensation Act requires that YWCHSB maintain a “Compensation Fund.” We refer to it as “the Fund” for short. It is a trust fund that contains enough money to cover the total current and future costs of caring for workers injured on the job.
In fact, the Fund contains more than enough. Our funding policy requires that we maintain the Fund to a “target range” of between 121 and 129 percent of our total liabilities using “reserves.” These reserves are necessary to ensure we can provide rate stability, protect the Fund from unforeseen catastrophic events, and provide benefits to workers both now and well into the future.
When the Fund’s level exceeds 129 percent, our funding policy considers it to be in a surplus position.
As of December 31, 2017, the Fund is at a level of 143 percent. It is therefore considered to contain “surplus reserves.”
Why is the funding range set between 121 percent and 129 percent?
This target range is designed to stabilize rates by absorbing fluctuations in global financial markets and provides a needed buffer to protect employers from the financial repercussions of catastrophic workplace events.
The target range was established through extensive consultation with worker and employer stakeholder groups and is reflected in our funding policy.
How is YWCHSB funded?
YWCHSB is funded through premiums paid by all employers covered under the Workers’ Compensation Act, plus investment income.
How did the reserves grow to a surplus position?
Most of the surplus portion of the reserves was generated through higher than expected investment returns and positive operational results.
Why is YWCHSB delivering rebates?
Rebates are a responsible, controlled method for accelerating the distribution of surplus reserves to employers in order to return the Fund to its target range.
In 2015 the Board of Directors, in consultation with key stakeholders, elected to distribute a portion of the surplus reserves to employers in the form of a 10 million dollar rebate. This rebate was distributed again in 2016 and 2017. In 2018, a 5 million dollar rebate was distributed.
Why doesn’t YWCHSB lower employer assessment rates instead?
In fact, YWCHSB has been doing this since 2012 through rate “subsidies.”
Rate subsidies are required by our funding policy when the Fund is in a surplus position. Like the rebate, they are intended to distribute the surplus to employers in an effort to return the Fund to its target level. However, subsidies have a minimal impact on reducing the surplus and the Fund’s strong
investment performance has countered their intended effects.
Rates subsidies can obscure the actual costs of the compensation and occupational health and safety systems. As a result of subsidies, artificially-low assessment rates make the cost of caring for Yukon workers injured on the job seem lower than they truly are.
Why don’t you distribute 100 percent of the surplus reserves?
Returning all the surplus reserves at once would result in an abrupt and substantial increase to assessment rates. After consultation with key stakeholders in 2015, the Board of Directors chose a measured approach to returning the reserves to the target range over a four-year period.
Will the rebates impact rates?
Because of subsidies, which are a result of the Fund’s surplus position, assessment rates are currently lower than the actual cost of the system.
Rebates are effective in significantly reducing the surplus reserves. As the reserves move closer to the target range, assessment rate subsidies automatically reduce. This increases assessment rates towards the actual cost of the system.
How much has been returned to employers through rebates and rate subsidies?
In total, employers will receive over $59.9 million through rebates and rate subsidies from 2012 to 2018.
Don’t the rebates suggest YWCHSB is taking more premiums from employers than it should?
No. In fact, because of the Fund’s surplus position and the resulting rate subsidies, employers are currently paying less than the actual cost of caring for Yukoners injured on the job.
Will YWCHSB increase worker benefits because of the surplus?
Yukon’s excellent benefits to workers are not impacted by a rebate to employers. Worker benefits are protected from increases or decreases in overall funding and are determined through the Workers’ Compensation Act and policy.
Who will get a rebate in 2018?
To be eligible for the rebate, an employer has to have had an account with us, paid premiums in 2017 and not be in third-party collection status (whereby YWCHSB has had to go to a credit agency or the courts to recover overdue premiums).
Eligible employers qualify for the rebate if they are in good standing with YWCHSB.
In other words, employers have to be in compliance with YWCHSB before they will receive their cheques. Compliance issues that may delay distribution of rebates include:
The employer assessment account has not been paid
There are outstanding or unresolved occupational health and safety (OHS) fines or orders
An employer has significant compliance issues with claims (such as late filing, return to work)
Or there is outstanding information (such as actual payroll information, outstanding audit requests)
How are the rebates calculated?
The rebates are calculated fairly and equitably and are based on how much employers paid into the Fund through premiums.
For 2018, eligible employers will receive a rebate based on the total premiums assessed from January 1, 2015, to December 31, 2017.
The payment will be 7.9 percent of the total premiums assessed during that time period.
Can employers expect a rebate every year?
No. the Board of Directors is distributing surplus reserves through lower assessment rates and the rebate. Once the Fund returns to target range, the rebate and rate reductions will end. How quickly this happens depends on what happens to claim costs, employer injury experience and the future returns on the Fund investments.
Still have questions?
Our employer services officers are ready to help with any of your business needs. Please call us at 867-667-5645 or 1-800-661-0443 between 8 a.m. and 5 p.m. Monday to Friday.