This is the third post in my series of updates and insights to assist Schedule 1 employers with the transition to the new WSIB Rate Framework (“RF”) which will commence on January 1, 2020.
The last post spotlighted two key policy updates, the Policy 14-02-01 Employer Level Premium Setting and Policy 14-02-06 Employer Premium Adjustments. This post highlights a third policy update and sets out options employers can pursue now to prepare for the transition.
Policy 14-01-09 Transition to the Rate Framework
Most recently, on March 7, 2019, the WSIB announced and released policy 14-01-09 Transition to the Rate Framework. This is the policy that we have been waiting for as it essentially covers how an employer will move from the current system into the new RF.
The policy confirmed that an employer’s business activity will be transferred to the RF and assigned the six-digit North American Industry Classification System (“NAICS”) code that best represents it. The WSIB selects the most appropriate NAICS code based on the employer’s classification unit(s) in the current system.
The employer will also be assigned an initial prior year risk band (see last post regarding risk bands) which will be the employer’s starting point in the RF. The initial prior year risk band will be assigned based on the employer’s net premium rate as determined from its experience and any experience rating adjustment in 2016-2018, inclusive.
There are differences in the method that the WSIB uses to determine the net premium rate depending on whether or not the employer had an experience rating adjustment (e.g. bulk issue rebate/surcharge in NEER or CAD-7 and premium rate adjustment in MAP) in any of the 2016-2018 (inclusive) calendar years.
If the employer received an adjustment, the WSIB calculates a net premium ratio. It is then applied to the 2019 premium rate of the rate group the employer was classified in to obtain the net premium rate.
If the employer did not receive an experience rating adjustment, their net premium rate is determined from the 2019 rate of the group in which they were classified.
The WSIB reserves the right to adjust an employer’s premium rate in “exceptional circumstances” in order to ensure that they commence the RF at an appropriate net premium rate. Exceptional circumstances are not defined in the policy.
Consistent with what was initially promulgated, the policy indicates that, in general, an employer will not move more than a maximum of three risk bands each year from its prior risk band toward their projected risk band. However, special rules override this general three-year rule for risk band movement in the early years of the RF from 2020-2022, inclusive, to give employers an opportunity to acclimate to the new system and potential increase in premium rates.
Accordingly, the special rules provide that there will be no upward movement of risk band in 2020. Then in the years 2021 and 2022, there will be a maximum upward movement of, respectively, one and two risk bands only. Thus, the first three years of the RF will be treated differently in order to ease employers into the RF. In particular this appears to preclude upward jumps of risk bands (which have the potential to increase premiums and for a surcharge) in the early years of the RF.
We note that the policy indicates the WSIB will be adding special rules for temporary employment agencies which have not yet been published.
What You Can Do Now:
The following are some of the many things that Ontario employers can do now in preparation for the RF:
- Check for your company’s letter from WSIB that sets out the new RF NAICS classification code(s). If you have concerns about misclassification, the predominant class or if you did not receive the letter, you can contact WSIB to address these concerns at 1-800-387-0750.
- If you have a material change WSIB requires that same be reported within 10 days. Any change in your business activity that could affect your classification/NAICS code should be reported within 10 days to ensure that your business is properly classified at the commencement of the RF.
- If you were previously unregistered or exempt from WSIB but are a Schedule 1 employer under either Part 1 or Part 2, seek advice on coverage options or obligations in the new RF.
- Though not covered in these posts, if you are a Schedule 2 employer and want to request to transfer to Schedule 1 for protection under collective responsibility, seek advice on transfer and coverage options or obligations in the new RF.
- Review the WSIB’s advance copies of the new policies at https://www.wsib.ca/en/rate-framework-policy-consultation.
- Register online to watch a Rate Framework webinar presented by WSIB. You can do so at this webpage: https://www.wsib.ca/en/rate-framework-webinars.
- Contact WSIB to host a rate framework webinar or information session.
- Pursue your existing objections and appeals under the current system as soon as possible. Be mindful of the January 1, 2020 RF implementation date, three-year retroactive adjustment period in the new RF, and the September 30, 2020 end date for the current experience ratings programs and the impact of these factors on recovery/adjustments.
- The WSIB cannot provide legal advice; however, it will respond to general RF questions. You may contact the WSIB via email with questions about RF at RateFramework@wsib.on.ca.
- Seek out specialized legal counsel who can assist your company with these matters.