Accident Compensation Corporation - Statement of Corporate Intent ...

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section 2: Funding This section describes how the Scheme is funded. ACC has three sources of funding: levy income, Government appropriation, and investment income. ACC seeks to collect sufficient revenue to meet the lifetime costs of clients’ injuries. Funding history Under the previous Act, ACC had a legislative requirement to be fully funded for all pre-1999 injuries by 30 June 2014. 4 In an amendment to the Act passed in March 2010, 5 this date was extended to 2019. Full funding means that there are sufficient assets to meet all of the organisation’s liabilities. From 1 July 1999, accident insurance cover for all workplace injuries was opened to competition and the Scheme was changed from a ‘pay-as-you-go’ to a fully-funded scheme. Under ‘pay-asyou-go’ levy income was raised only to cover the costs due to be paid during the levy year. The ongoing cost of existing claims remained an unfunded liability. All levies from 1999, and from 2001 for the Non-Earners’ Account, have been collected on a fullyfunded basis. This created an unfunded liability for injuries that occurred before those dates and are still receiving entitlements. This unfunded liability was included within the residual portion of each Account. Residual claims for the Work Account were funded separately in the Residual Claims Account. Under the recent legislative changes the Residual Claims Account has been incorporated into the Work Account. The outstanding claims liability The outstanding claims liability is an actuarial estimation of the net present value of all the future costs for claims that have already occurred as at the valuation date. The liability is reassessed twice a year and levy rates are adjusted annually to respond to any changes (including economic factors such as changing interest rates, investment returns and the expected cost of claims) in order to remain on track to achieve full funding. Based on the last actuarial assessment of the valuation at 31 December 2009, the outstanding claims liability is forecast to be $24.4 billion inclusive of risk margins 6 as at 30 June 2010. 4. The Non-Earners’ Account does not have a full-funding target. 5. Accident Compensation Amendment Act 2010. 6. ACC is obliged, under the New Zealand equivalents to International Financial Reporting Standards, to operate with a risk margin. The risk margin is an addition to the liability whose purpose is to increase the probability that ACC will have adequate funds to meet its future obligations. 10
Figure 2 shows the key factors that have led to the increase in the liability since 2004. Figure 2: Recent growth in the outstanding claims liability (OCL) to 30 June 2009 Outstanding claims liability ($million) 25,000 20,000 15,000 10,000 5,000 9,347 OCL as at 30 June 2004 1,439 Economic factors 2,662 595 Accounting standards New programmes and legislation 1,082 1,155 Weekly compensation 1,443 3,142 Social rehabilitation 827 672 Medical and elective surgery 548 23,785 874 All other OCL as at 30 June 2009 Actual Anticipated increase Other changes Unanticipated changes in experience and modelling Funding structure The Scheme is managed through five separate Accounts, each maintained for a specific purpose. The Accounts are funded through levies collected to meet the current and future costs of providing rehabilitation services and compensation for claims within each Account. These are shown in the table below. Table 3: Funding structure Account Type of cover Source of funding Work Work-related injuries Employers Self-employed Earners’ Non-Earners’ Motor Vehicle Treatment Injury Non-work injuries to earners (e.g. home, sport) Injuries to non-earners (e.g. students, elderly) Injuries involving motor vehicles on public roads Injuries from medical treatment PAYE income Self-employed Government appropriation Petrol levy Licensing fee Earners’ and Non- Earners’ Accounts (Government) 2010–2011 Average aggregate levy (excl. GST) $1.47 per $100 liable earnings $1.78 per $100 liable earnings Forecast 2010–2011 levy revenue ($million) Forecast Outstanding claims liability at 30 June 2011 7 ($million) 1,223 5,140 1,595 4,723 n/a 1,016 3,949 Composite average levy $334 995 6,206 n/a 328 2,103 Total 5,157 22,121 7. The forecast liability is based on the back-to-BASE economic assumptions at 30 June 2009. These assumptions are the baseline used in the calculation of the actuarial release. 11
Page 1: Statement of Intent 2010-2013 Our r
Page 4 and 5: Foreword from the Board Chair The l
Page 6 and 7: ACC’s strategic direction Overarc
Page 8 and 9: Guide to this document This documen
Page 10 and 11: • Rehabilitation: specific provis
Page 14 and 15: ACC managed $11.1 billion in invest
Page 16 and 17: The claims management and health pu
Page 18 and 19: section 4: Operating intentions Thi
Page 20 and 21: National injury prevention targets
Page 22 and 23: Impact measures The impact measures
Page 24 and 25: Outcome 2: Rehabilitate injured peo
Page 26 and 27: Key initiatives to support Outcome
Page 28 and 29: Exploration of alternative service
Page 30 and 31: Outcome 3: Reduce the incidence and
Page 32 and 33: Key initiatives to support Outcome
Page 34 and 35: Key initiatives to improve organisa
Page 36 and 37: Health purchasing contract manageme
Page 38 and 39: section 6: Collaboration and respon
Page 40 and 41: Reporting requirements Consultation
Page 42 and 43: ACC subsidiaries The following two
Page 44 and 45: Output class 1: Levy collection and
Page 46 and 47: How effective is levy collection an
Page 48 and 49: What is the scale of investment man
Page 50 and 51: The following table provides a summ
Page 52 and 53: Output class 4: Injury prevention W
Page 54 and 55: How efficient is injury prevention?
Page 56 and 57: section 8: Forecast financial infor
Page 58 and 59: • Earners’ Account - a $277 mil
Page 60 and 61: • independence allowances are bud
Page 62 and 63:
Investment income Future investment
Page 64 and 65:
Forecast financial statements Paren
Page 66 and 67:
Balance sheet As at 30 June 2011 to
Page 68 and 69:
Summary of significant accounting p
Page 70 and 71:
Non-Earners’ Account The Non-Earn
Page 72 and 73:
Deferred tax is accounted for using
Page 74 and 75:
Revaluations Fair value is determin
Page 76 and 77:
w) Unexpired risk liability At each
Page 80:
www.acc.co.nz 0800 101 996 This pap
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