< Previous60 | WCB 2017 ANNUAL REPORT7. DEFERRED ASSESSMENTSAccounting policyDeferred assessments represent the WCB’s estimate of the present value of premiums which will be received in the future from self-insured employers to fund the future costs of existing claims that have arisen from their employees. As such, the fair value for deferred assessments is not readily determinable. The deferred assessments may be secured by irrevocable letters of credit or other suitable forms of guarantee.The changes in deferred assessments were as follows:20172016Balance at beginning of year$136,951$137,335Increase (decrease) in future cost liability4,550(479)(Decrease) increase in pension-related transactions(1,413)1,467Interest allocation (40)(14)Net change in deferred assessments (Note 15)3,097974Current pension surplus (deficit) included in receivables and other1,479(1,358)Balance at end of year$141,527$136,951WCB 2017 ANNUAL REPORT | 618. PROPERTY AND EQUIPMENTAccounting policyProperty and equipment are valued at cost, less accumulated amortization and any accumulated impairment loss. Amortization is calculated on a straight line basis over the estimated useful life of the asset, as follows:Building40 yearsBuilding renovations and leasehold improvements2 to 10 yearsComputer equipment3 to 5 yearsFurniture, fixtures and equipment 5 yearsAn item of property and equipment is derecognized upon disposal or when no further economic benefits are expected from its use. Any gain or loss arising on derecognition is included in operating expenses. The carrying amounts of the WCB’s non-financial assets are reviewed at each reporting date to ensure that assets are not carried in excess of the recoverable amount. The changes in property and equipment were as follows:20172016Building and landBuilding renovations and leaseholdsComputer equipmentFurniture, fixtures and equipmentTotalTotalCostAs at January 1$23,682$6,544$9,202$ 3,775 $43,203$40,833Additions6951,9709167934,3742,431Disposals-(103) (242)- (345) (61)As at December 3124,3778,4119,8764,56847,23243,203AmortizationAs at January 1 (3,124) (3,427) (6,757) (3,009) (16,317) (13,969)Amortization charge (705) (905) (1,224) (333) (3,167) (2,408)Disposals- 103242-34560As at December 31 (3,829) (4,229) (7,739) (3,342) (19,139) (16,317)Net book value, as at December 31$ 20,548$ 4,182 $2,137 $1,226$28,093$ 26,886 62 | WCB 2017 ANNUAL REPORT9. INTANGIBLE ASSETSAccounting policyAcquired intangible assets, primarily computer software, are valued at cost less accumulated amortization. Amortization is calculated on a straight line basis over the estimated useful life, and included in operating expenses.Internally generated intangible assets, primarily software and systems development, including professional fees incurred to implement these assets, are valued at cost and amortized over their useful lives. Amortization is calculated on a straight line basis over the estimated useful life, as follows:Computer software3 yearsInternally generated systems development 10 yearsThe carrying amounts of the WCB’s non-financial assets are reviewed at each reporting date to ensure that assets are not carried in excess of the recoverable amount. The changes in intangible assets were as follows:20172016Computer softwareInternally developed systems and softwareTotalTotalCostAs at January 1$ 4,288 $ 19,164 $23,452$19,614Additions1833,9294,1123,842Disposals - (1,212) (1,212) (4)As at December 314,47121,88126,35223,452AmortizationAs at January 1 (3,919) (12,518) (16,437) (15,503)Amortization charge (237) (1,503) (1,740) (937)Disposals - 1,2121,212 3As at December 31 (4,156) (12,809) (16,965) (16,437)Net book value, as at December 31$315$9,072$9,387$7,015WCB 2017 ANNUAL REPORT | 6310. PAYABLES AND ACCRUALSAccounting policyPayables and accruals are obligations to pay for goods and services acquired in the normal course of operations. The WCB records a liability and an expense for goods upon receipt or transfer of control, and for services when they are performed. Other payables include various payroll-related liabilities and deposits from self-insured employers. The timing and amount of payables and accruals are readily determinable. These amounts are normally settled before the end of the next reporting period.Payables and accruals are comprised of:20172016Accounts payable and accrued liabilities$8,610$4,828Research and Workplace Innovation Program2,4722,330Deposits from self-insured employers5,9956,468Other payables1,4171,526Balance at end of year$18,494$15,15211. WORKERS’ RETIREMENT ANNUITY FUNDAccounting policyIn accordance with Section 42(2) of the Act, where wage loss benefits are paid to a worker after a qualifying period, the WCB is required to invest on a worker’s behalf an amount equal to a percentage between five per cent and seven per cent, to provide an annuity for the worker at retirement. In addition, the worker may contribute an amount of not more than the amount contributed by the WCB. This annuity fund is part of the WCB investment portfolio and is intended to establish or replace lost pension entitlement resulting from a work-related injury or illness.The changes in the workers’ retirement annuity fund were as follows:20172016Balance as at January 1$31,245$29,814Investment income2,483894WCB contributions1,6691,601Workers' contributions475451Benefits paid (2,171)(1,515)Balance as at December 31$33,701$31,24564 | WCB 2017 ANNUAL REPORT12. EMPLOYEE BENEFITSAccounting policyThe WCB has several employee benefit plans:Short Term BenefitsShort term employee benefits are measured on an undiscounted basis and are expensed when the services are rendered. These benefits include wages, salary, vacation entitlements and group health plans. Retirement plans The retirement plans, comprised of the WCB Retirement Plan and the Supplementary Employee Retirement Plan, are funded by employee and employer contributions. The WCB Retirement Plan is a defined benefit pension plan that provides indexed pensions (two-thirds of the Consumer Price Index for Canada) based on years of service and the best five consecutive years average earnings in the last 12 years of employment. The Supplementary Employee Retirement Plan provides that the employees of the WCB, whose pension benefits exceed the maximum pension benefit permitted under the federal Income Tax Act, will receive pension benefits based on their total pensionable earnings.Sick leave plan The WCB sick leave plan is a multi-faceted benefit plan. Sick leave credits are earned and payable in the form of sick leave in the current year. Unused sick leave credits are accumulated and carried forward to future periods, and are available to be taken as sick leave when the current year entitlement is exhausted. For employees that meet established criteria upon termination or retirement, the sick leave plan represents a post-employment benefit plan that provides for payment of sick leave credits. For accounting purposes, it is treated as a defined benefit plan and the liability is valued on the basis of discount rates and other estimates that are consistent with the estimates used for defined benefit obligations. For this unfunded plan, where the WCB funds the obligation directly from its own resources, employee contributions are not required.WCB Retiree Healthcare Spending Account (RHCSA)The RHCSA was introduced March 1, 2014. Eligible retirees receive a predetermined annual credit amount which may be used to cover healthcare expenses not covered by other plans. The RHCSA is a defined benefit plan. The WCB funds this plan directly via the plan administrator.Recognition and measurementThe WCB measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year, using actuarial assumptions that are unbiased and mutually compatible. The assumptions represent management’s best estimates of the variables that will determine the ultimate cost of post-employment benefits. Actuarial assumptions are comprised of demographic assumptions on matters such as mortality and employee turnover, and financial assumptions on matters such as salary and benefit levels, interest rates and return on investments. Given the long term nature of the plan and the use of these assumptions, the resulting estimates are subject to significant uncertainty.The Projected Unit Credit Method is used to calculate the defined benefit obligations and current service costs. This method reflects service rendered by employees to the date of valuation and incorporates actuarial assumptions regarding discount rates used to determine the present value of benefits, projected rates of salary growth and long term expected rate of return on plan assets.WCB 2017 ANNUAL REPORT | 65Discount rates are based on the market yields of high-quality corporate bonds.In accordance with IAS 19 Employee Benefits, the net interest approach is used to disaggregate the costs of the retirement plans. The change in the net defined benefit liability is disaggregated into the following components:• Service cost, or the additional liability that arises from employees providing service during the period• Net interest or the interest expense on the net defined benefit liability calculated using the discount rate• Remeasurements, which are other changes in the value of the defined benefit obligation such as changes in estimates and other changes in the value of plan assets. Service cost and net interest are recognized in operating surplus whereas remeasurements are recognized in other comprehensive income. Employee contributions, which are independent of the number of years of service, are treated as a reduction of service cost.When past service costs arise they are recognized immediately.Components of the employee benefits liability are as follows:20172016Retirement plans$109,799$77,911Sick leave plan12,76012,031Employee vacation entitlements4,7234,713Retiree healthcare spending account2,5832,188Other589312As at December 31$130,454$97,155The key actuarial assumptions used to value the employee benefit liabilities for accounting purposes are as follows:20172016Discount rate3.50%4.00%Rate of compensation increase3.50%3.50%66 | WCB 2017 ANNUAL REPORTRetirement plans A reconciliation of the retirement plans’ net defined benefit liability and its components is as follows:Defined Benefit ObligationFair Value of Plan AssetsNet Defined Benefit LiabilityNet Defined Benefit Liability20172016Balance at January 1$271,207$(193,296)$77,91166,566Benefit cost recognized in income:Current service cost 13,077-13,07711,946Interest expense (income)10,760(7,812)2,9482,642Employee contributions - (3,619)(3,619)(3,506)23,837(11,431)12,40611,082Remeasurements recognized in OCI:Experience loss 1,755-1,7551,641Loss from changes in actuarial assumptions31,438-31,43812,037Return on plan assets excluding interest income-(8,911)(8,911)(8,155)33,193(8,911)24,2825,523Other changes:Employer contributions-(4,800)(4,800)(5,260)Transfers to the plan608(608)--Benefits paid(5,017)5,017--(4,409)(391)(4,800)(5,260)Balance at December 31$323,828$(214,029)$109,79977,911The most recent actuarial valuation of the WCB Retirement Plan for funding purposes, to be filed with the pension regulators, was as at December 31, 2017. This funding valuation showed a funding surplus of $4.4 million (2016 valuation, deficit of $1.4 million). The solvency deficit as at December 31, 2017 was $97.6 million (2016 valuation, deficit of $89.7 million). The WCB is not required to fund this deficiency as the WCB is exempt from the solvency and transfer deficiency provisions of the Pension Benefits Act.WCB 2017 ANNUAL REPORT | 67The fair value of the retirement plan assets as at December 31 is: 20172016EquityCanadian$53,804$48,256Foreign (including US)64,11157,850117,915106,106Fixed income53,07948,337Real estate43,03538,853As at December 31$214,029$193,296The retirement plans’ assets are wholly invested in segregated funds. The fair value represents the retirement plans’ share of the net asset value provided by the custodian and is based on the last market price for the underlying assets. At December 31, 2017, plan assets are categorized as Level 1 with the exception of certain fixed income investments which are categorized as Level 2. Sick leave plan A reconciliation of the sick leave plan net defined benefit liability (equal to the defined benefit obligation) is as follows:20172016Balance at January 1$12,031$11,588 Benefit cost recognized in income:Current service cost605518Interest expense4644801,069998Remeasurements recognized in OCI:Experience (gain) loss(11)2Loss on change in actuarial assumptions5221251114Benefits paid directly by the employer(851)(569)Net defined benefit liability at December 31$12,760$12,031WCB Retiree Healthcare Spending Account (RHCSA)Details of the WCB RHCSA are as follows:20172016Balance at January 1$2,188$1,930Benefit cost recognized in income189174Remeasurements recognized in OCI:Loss on change in actuarial assumptions22493Employer contributions(18)(9)Change in net defined benefit ability395258Net defined benefit liability at December 31$2,583$2,18868 | WCB 2017 ANNUAL REPORTSensitivity of actuarial assumptionsThe actuarial present value of the defined benefit obligation is sensitive to changes in actuarial assumptions, the most significant assumption being the discount rate. The following table illustrates the sensitivity of the defined benefit obligation to a one per cent change in the discount rate:20172016+1.0%-1.0%+1.0%-1.0%Retirement plans $ (53,830)$ 71,334$ (43,568) $ 57,352Sick leave plan (459)1,674 (945) 1,094Retiree healthcare spending account (399)514 (337)434Total cash payments for employee future benefits for 2017, consisting of cash contributed by the WCB to the funded pension plan and cash payments directly to beneficiaries for unfunded plans, were $5.6 million ($5.8 million in 2016). Based on historical experience and expected salary expense, the WCB expects to fund $5.7 million in 2018.Related Party Transactions By definition, the WCB retirement plan is a related party to the WCB. Transactions between the related parties are detailed below: 20172016Contributions from the employees$3,619$3,506Contributions from the employer4,8005,260There were no amounts outstanding as at December 31, 2017 or December 31, 2016.13. BENEFIT LIABILITIES FOR ALL EMPLOYERSAccounting policyUnder the provisions of the Act, the WCB has a legislated obligation to accept insurance risk from employers in exchange for premiums paid for WCB coverage.The WCB’s Chief Actuary prepares a valuation of the benefit liabilities of the WCB at each year end. This valuation is conducted in accordance with accepted actuarial practice in Canada, and is subject to peer review by the WCB’s external actuary. The benefit liabilities represent the actuarial present value of all future benefit payments expected to be made for claims or injuries which occurred in the current fiscal year or in any prior year. The benefit liabilities include provisions for all benefits provided by current legislation, policies and/or administrative practices in respect of existing claims, plus provisions for the future expenses of administering the existing claims. Differences arising from actual claims experience and assumptions used for the previous valuation, as well as the impacts of changes in legislation, policy, administrative practice or actuarial methods and assumptions, are recognized in the period that they occur. The benefit liabilities also include an estimated liability for certain long latent occupational diseases. Due to the nature of the estimated liability for long latent occupational diseases and the extent of related historical claims information currently available, this liability is more uncertain by its nature than other benefit liabilities. As information is accumulated and analyzed, adjustments may be necessary to improve precision.WCB 2017 ANNUAL REPORT | 69Benefit liabilities are determined in accordance with standards established by the Actuarial Standards Board (Canada). The actuarial present value of future benefit payments reflects management’s long term estimates of economic and actuarial assumptions and methods, which are based upon past experience and modified for current trends. As these assumptions may change over time to reflect underlying conditions, it is possible that such changes could cause a material change in the actuarial present value of the future payments. The fair value for benefit liabilities is not readily determinable.The key actuarial assumptions used to value the benefit liabilities as at December 31 are as follows:20172016Discount rate5.75%5.75%Inflation for CPI-indexed benefits2.25%2.25%Inflation for wage-related benefits3.25%3.25%Inflation for healthcare benefits5.25%5.25%An analysis of the components of and changes in benefit liabilities is as follows:20172016Short Term DisabilityLong Term DisabilitySurvivor BenefitsHealthcare BenefitsRehabilitation ServicesTotalTotalBalance at beginning of year$159,573$504,485$127,619$311,309$3,656$1,106,642$1,120,525Add: Claim costs incurredCurrent year52,06449,4902,70454,5681,307160,133150,234Prior years5,7897,9754,76510,0212,38930,93917,82357,85357,4657,46964,5893,696191,072168,057Less: Claim payments madeCurrent year27,72696719721,880-50,77048,979Prior years30,92854,24611,64735,407352132,580132,96158,65455,21311,84457,287352183,350181,940Balance at end of year$158,772$506,737$123,244$318,611$7,000$1,114,364$1,106,642The liability for short term disability claims is an estimate of future wage loss payments for claims that have yet to medically plateau or stabilize. The long term disability liability includes estimated future wage loss payments for those claims that have medically plateaued and stabilized, estimated future pension payments, and estimated future cost of claims relating to certain long latent occupational diseases. The liability for survivor benefits is composed of estimated future pension payments and other services provided to survivors of those who have lost their lives as a result of workplace injuries or illnesses. Healthcare liabilities are the estimated future medical costs for existing claims. The liability for rehabilitation services is composed of the estimated cost of future rehabilitation services which are externally supplied to the WCB.Included in the benefit liabilities balance is $107.1 million ($100.4 million in 2016) for the estimated long latent occupational disease liability including Post-Traumatic Stress Disorder. The Workers Compensation Act of Next >