Toronto, March 22 – Ontario faces a $19.7 billion unfunded liability at its Workplace Safety Insurance Board (WSIB) based on a fair-value accounting approach, according to a report from the C.D. Howe Institute. In “The Hole in Ontario’s Budget: WSIB’s Unfunded Liability,” authors Colin Busby and Finn Poschmann say the WSIB, which levies employer premiums intended to fund benefits for employees injured in the workplace, has a problem that needs addressing: the WSIB’s pace of revenue collection and asset accumulation has not matched growth in current and expected benefit entitlements.
For its part, note the authors, the WSIB reports an unfunded liability of $12.3 billion: to arrive at that number the Board discounts its current benefit liabilities at a 7.0 percent nominal interest rate. However, a fair-value accounting method would use a much lower discount rate, implying a much higher true liability.
“The WSIB is an elephant-sized problem for employers, employees and potentially taxpayers that will not be reported in the upcoming Ontario budget,” says Colin Busby, Senior Policy Analyst, “and it urgently needs corrective action.”
Were the WSIB to discount benefit liabilities at a rate that better reflected the cost of guaranteeing benefits, it would report an unfunded liability about $7.4 billion higher, at $19.7 billion, implying a shortfall of about $4,100 per insured worker in Ontario, the authors find.
The report concludes that protecting taxpayers from bearing the costs of unfunded benefits will require fixing the WSIB’s financing problems, through increased employer contributions – implying lower wage growth for employees – benefit adjustments, or both. To facilitate these changes, more stringent financing rules are required.
Click here for the full report.
For more information contact:
Colin Busby, Senior Policy Analyst; or Finn Poschmann, Vice-President Research, C.D. Howe Institute