2012 Financial Statements - Workers' Compensation Board

4. FUNDING
Accident Fund
The Act stipulates the creation of an Accident Fund (the Fund) holding sufficient funds for the payment
of present and future compensation. The Fund is fully funded when the total assets equal or exceed total
liabilities. This Funded Position (or net assets) represents the current funding status of the Fund.
The Funded Position is maintained through two reserves within the Accident Fund: the Fund Balance and
the Occupational Disease Reserve (ODR). The Fund Balance represents accumulated net operating surpluses
retained against financial uncertainty. The ODR was established through an appropriation from the Fund
Balance to provide for costs arising from latent occupational injury or disease where a causal link to the
workplace has not been established, but may be established in the future. The ODR is maintained at six
per cent of claim benefit liabilities in each year through a transfer from or to the Fund Balance.
Funding Policy and capital management
Since the Act does not provide for an ownership-based capital structure, WCB views its available capital
resources as synonymous with its Funded Position. The primary objective in managing the Funded Position
is to mitigate the risk of being unfunded, while a secondary objective is to minimize premium rate volatility
caused by investment and claim benefit liability risk. WCB manages the financial status of the Accident Fund
by monitoring the Funded Position and making funding decisions in accordance with the Funding Policy.
The Funding Policy sets a target zone of 114 – 128 per cent for the Funded Ratio (total assets divided by total
liabilities) to guide funding decisions. When the Funded Ratio falls below the target zone, special funding
requirements are included in premium rates. When the Funded Ratio is above the target zone, surplus
distributions may be paid. There were no changes to the described Funding Policy or capital management
practices during the year.
($ thousands) 2012 2011
Accident Fund
Total assets
Less:
Total liabilities
Funded Position
Funded Ratio
$8,533,775
6,552,366
$1,981,409
130.2%
$7,509,680
5,854,593
$1,655,087
128.3%
2012 FINANCIAL STATEMENTS and notes 51