In Mid-August the WSIB released seven draft consultation papers related to Rate Reform. They are:
Employer Premium Rate Setting
Employer Premium Adjustments
Eligibility for Single or Multiple Rate Groups
Temporary Employment Agencies
The Classification Structure
The information discussed in this newsletter is based upon the information published in these discussion paper and could change as the WSIB develops the policies related to these papers.
The three most of these (to most Ontario employers) are Premium Rate Setting, Adjustments and the ability to contribute to more than one rate group.
Employer Premium Rate Setting:
There are two steps to determining the premium rate for any employer:
The rate group premium rates
Every rate group will have a minimum, base and maximum premium rate
Each rate group is expected to have between 40 and 83 price points
New companies will enter the rate group at the base premium rate
The individual premium for the employer within the rate group
Your 2020 premium will be set based upon your direct accident costs for 2013-2018
Each price point will be referred to as a risk band
Your premium rate can decrease by a maximum of 3 risk bands per year
Your premium rate can increase by a maximum of 3 risk bands per year
There are exceptions and they will be discussed in Employer Premium Adjustments
In Rate Reform competitors will no longer pay the same premium rate. Company’s premiums will be determined by their accident histories.
Competitor A has many accidents but effectively manages those claims is likely to have a lower premium rate than Competitor B that has been accident free until one calamitous claim occurs where the injured worker will never returns to their pre-accident employer.
Employer Premium Adjustments
The WSIB has the ability to adjust a company’s premium rate beyond the risk band adjustment for claims cost activity. This type of adjustment would only occur if:
A debit adjustment of the types discussed below could increase a company’s premiums more than 3 risk bands in any given year.
The two-year rule
If an employer has made an error in reporting for issues such as an instance where an independent Operator is determined to be any employee the WSIB can recalculate the premiums for the most recent two years for which the premiums should have been paid on those wages. These types of adjustments can be thought of as bookkeeping errors and generally would be reported by the employer to the WSIB.
The seven-year rule
If the WSIB determines an employer willfully submitted incomplete or inaccurate payroll information then the WSIB can upon the findings of their audit, recalculate the premiums owed for up to 7 years. An instance where would apply would be a construction company declares the owner exempt from WSIB premiums (the owner declared they do not do actual construction work) but is not eligible for that exemption.
The WSIB has the power to adjust premiums for an unlimited number of years if it has been determined the employer committed a fraudulent act or committed an offense under the Workplace Safety and Insurance Act.
The WSIB, when an act of claim suppression is discovered (the employer told their injured worker to say they hurt themselves at home for example) will apply the costs of that claim to the year of the accident.
All of the above will increase the premiums will pay in the affected years and could impact their premium rate in future years as well. However, companies that are diligent in their reporting of payroll, premiums and accidents are unlikely to be affected by these debit adjustments.
A credit adjustment of the types discussed below could increase a company’s premiums more than 3 risk bands in any given year.
The WSIB can make premium credit adjustments to an employer’s account for up to seven years under the following circumstances:
Second Injury Enhancement Fund (Cost Relief)
Change in Accident Date
Transfer of Costs
Transfer of Insurable Earnings to another employer
The good news here is that WSIB has confirmed SIEF Cost Relief and other cost reduction tools will remain in place.
As discussed in prior newsletters SE-GA strongly recommends every Ontario employer consider seeking cost relief on all prior costly claims as the reduction of claim costs will lower your entry point in your new rate group. In Rate Reform it’s all about where you start.
Single or Multiple Rate Groups
Rate Reform will use the 6-digit NAICS code to determine which rate groups apply to Ontario’s employers.
If a company has one business activity with ancillary operations that support that activity the company will only contribute premiums to the business activity of the predominant business activity.
If a company has more than one business activity, and those activities are not integrated, then the company can contribute to more than one rate group provided:
The total annual insurable earnings of that business activity are at least 5 times the maximum insurable earnings for that premium year, AND
At least 25% of the total annual insurable earnings
Company A is a foundry that has a tool shop for the foundry. In NEER this company has a separate rate group for both business activities. In Rate Reform both parts of the company will contribute to the premium group associated with the predominant business activity of the foundry.
Company B manufactures spirits and has their own retail stores throughout the province. Their manufacturing operations will contribute to the food manufacturing rate group while their stores will contribute separately to the retail operations rate group. The premium rates are independent to the claims activity in each rate group.
As new information is released by the WSIB SE-GA will continue to update our readers through this newsletter.