The Budget Committee on February 17, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the recommendation of the Corporate Services Committee, wherein it is recommended that the joint report February 16, 1998, from the Chief Financial Officer and Treasurer, and the Commissioner of Human Resources be adopted, such report containing the following recommendation:

The Budget Committee on February 17, 1998, had before it a letter of transmittal (February 16, 1998) from the Corporate Services Committee advising that the Committee on February 16, 1998, recommended to the Budget Committee, and Council, the adoption of the joint report dated February 16, 1998, from the Chief Financial Officer and Treasurer, and the Commissioner of Human Resources regarding the Workers' Compensation transfer of funds of the former City of York from Schedule 1 to Schedule 2 pursuant to the Workplace Safety and Insurance Act.

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(Transmittal letter dated February 16, 1998, addressed to the

Budget Committee from the

Corporate Services Committee)

The Corporate Services Committee on February 16, 1998, recommended to the Budget Committee and Council, the adoption of the joint report (February 16, 1998) from the Chief Financial Officer and Treasurer, and the Commissioner of Human Resources.

The Corporate Services Committee on February 16, 1998, had before it a joint report (February 16, 1998) from the Chief Financial Officer and Treasurer and the Commissioner of Human Resources proposing a recommendation to create one uniform Workers' Compensation funding mechanism for the City of Toronto, as required by the Workplace Safety and Insurance Board; advising that the transfer to Schedule 2 is $1,074,964.23, if paid by February 28, 1998; that the projected savings resulting from the transfer are estimated to be $281,200.00 per month, rising with inflation; that payment from the Workers' Compensation reserve fund would be repaid over the next four years from the expected savings; that there is no impact on the 1998 Operating Budget; and recommending that Council authorize the Chief Financial Officer and Treasurer to remit immediately to the Workplace Safety and Insurance Board the amount of $1,019,411.00 in satisfaction of the transfer of the former City of York from Schedule 1 to Schedule 2 pursuant to the Workplace Safety and Insurance Act.

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(Joint report dated February 16, 1998, addressed

to the Corporate Services Committee from the

Chief Financial Officer and Treasurer and the

Commissioner of Human Resources)

The purpose of this report is to propose a recommendation to create one uniform Workers= Compensation funding mechanism for the City of Toronto, as required by Workplace Safety and Insurance Board.

The cost of the transfer to Schedule 2 is $1,074,964.23 if paid by February 28, 1998. The projected savings resulting from the transfer are estimated to be $281,200.00 per annum, rising with inflation. Payment from the Workers= Compensation reserve fund would be repaid over the next four years from the expected savings. There is no impact on the 1998 operating budget.

It is recommended that Council authorize the Chief Financial Officer and Treasurer to remit immediately to the Workplace Safety and Insurance Board the amount of $1,019,411.00 in satisfaction of the transfer of the former City of York from Schedule 1 to Schedule 2 pursuant to the Workplace Safety and Insurance Act.

None

The Workplace Safety and Insurance Board=s policy is that all employers must be designated as a Schedule 1 or Schedule 2 employer.

Under the Workplace Safety and Insurance Act there are two funding mechanisms B referred to as Schedule 1 and Schedule 2 B applicable to employers.

Schedule 1 employers are collectively liable for paying the costs of workers= compensation claims. These employers are assessed within their rate groups, and pay an annual Apremium@ for coverage for all claims incurred. They are subject to an experience rating program which results in refunds or surcharges depending on claims performance.

Schedule 2 employers, on the other hand, are individually liable for paying the costs of workers= compensation claims. Schedule 2 employers self-insure the risk of their claims, paying the benefits as they arise plus a 15 percent administrative charge to the Workplace Safety and Insurance Board. Some employers in this category purchase private supplementary excess-loss insurance, and establish segregated reserve funds to cover Acatastrophic@ claims.

Transfers to Schedule 2 are premised upon the employer paying its share of the Workplace Safety and Insurance Board=s Schedule 1 unfunded liability, effective upon the transfer date.

A Schedule 1 designation provides security from the risk of catastrophic claims, much the same as any other insurance plan. It makes sense for either smaller employers who cannot sustain the impact of such claims, or high risk industries where accident frequency, and resultant lost-time, are key factors. The City of Toronto does not fall into either category.

Schedule 2 is more suited to employers with the resources to pay claims as they arise, and whose lost-time experience compares significantly better than others within the same industry over a sustained period of time. With the exception of the former City of York, all of the other former municipalities have been in Schedule 2 because of the cost-savings that, in conjunction with strong health and safety and claims management programs, can be achieved over the long term.

As a Schedule 1 employer, the City of York was paying in excess of $600,000.00 per year as its Workplace Safety and Insurance Board assessment, minus rebates for favourable experience. However, its actual lost-time injury rate declined over the last ten years, and in 1996 the City=s total benefit awards, excluding worker pensions, were half of the average experience for a Schedule 1 Local Government with the same frequency of lost-time claims. Consequently, significant savings would be realized over time under the self-insured model.

These savings were confirmed to the former City of York in a study of the City=s workers= compensation experience conducted by Nexus Actuarial Consultants Ltd. The consultant concluded that it would be in the City=s long-term interests to transfer to Schedule 2. It was estimated that sustainable savings of $281,200.00 would have accrued to the City commencing in 1998, rising thereafter with inflation.

Through consultation with City representatives, the Board has provided an opportunity to transfer the former City of York to Schedule 2 and utilize York=s 1996 and 1997 premium contributions against the normally applied transfer fee. The fee for transfer is approximately $1.9 million. The offset of the 1996 and 1997 assessments would reduce this number to $1,074,964.00. The Board has been very flexible in terms of delaying requirement for payment of this amount to the end of February of this year.

The transfer to Schedule 2 of former City of York employees is required by the Workplace Safety and Insurance Board, and is in the long-term financial interests of the City of Toronto. The Board has requested that the fee for the York transfer be remitted as soon as possible after February 28, 1998. It is recommended that Council approve the expenditure, thus guaranteeing that the 1996 and 1997 assessment offsets will be applied against the amount owing.

Patrick Kelly, Senior Director of Human Resources, York Civic Service Centre, 394-2598.