< Previous2019-2023 FIVE YEAR PLANThe financial statements presented in the Five Year Plan are unaudited.80 WCB 2018 ANNUAL REPORTWCB 2018 ANNUAL REPORT 81In 2018, the Board of Directors adopted a new strategic framework to guide the organization into the future. The framework provides a clear direction and guides the organization to achieve its vision, A safer Manitoba that fosters prevention and return to work.To succeed in our new vision, the WCB has revamped its strategic goals to focus on four priorities that will provide an operational framework for how the organization conducts its business. The Five Year Plan looks to the future, outlining significant initiatives that will build on the strategies for success in each of the four priorities.INTRODUCTIONCreate a SAFE Work CultureDeliver Excellent ServiceEnable Successful Return to WorkGrow our People82 WCB 2018 ANNUAL REPORTTIME LOSS INJURIES Reduce the number to 12,000 or less—Achieve a rate of 2.2 or less per 100 full time workersGoal:• Reduce the number and severity of injuries.Major Initiatives:Expand and enhance Manitoba’s safety infrastructure through Industry-Based Safety ProgramsSAFE Work Manitoba is committed to working in partnership with existing industry-based safety programs and directly supporting the establishment of new safety programs in additional industries.Increase and expand other Prevention ProgrammingSAFE Work Manitoba is committed to increasing public awareness and stakeholder engagement, increasing participation in education and training as well as expanding certification and standards.CREATE A SAFE WORK CULTUREFive Year Targets: In the five year period covered by this plan, the WCB is focused on the following milestones:DAYS LOST TO WORKPLACE INJURY OR ILLNESSReduce the number to 748,000 or less—Achieve a rate of 1.38 or less per 100 full time workersSEVERE INJURIES Reduce the number to 2,200 or less—Achieve a rate of 0.4 or less per 100 full time workersWCB-COVERED PAYROLL Achieve at least 42% that is SAFE Work Certified—Increase percentage served by an industry-based safety program to 72% or moreWCB 2018 ANNUAL REPORT 83ENABLE SUCCESSFUL RETURN TO WORKMajor Initiatives:Improve Return to Work practicesThe WCB is committed to promoting the value of Return to Work and supporting best practices in Return to Work. This includes helping workplaces increase the effectiveness of their Return to Work programs, delivering Return to Work training and ensuring the WCB provides quality services to assist workers to return to meaningful and productive work as soon as safely possible after an injury. Improve our customers’ compensation and Return to Work experience The WCB understands and cares about the diverse needs of our customers. The WCB will continue to implement best practices in customer service and Return to Work by making improvements in telephone service and providing enhanced training in best practices.Goal:• Reduce days lost and improve the return to work experience.Five Year Targets: In the five year period covered by this plan, the WCB is focused on the following milestones:Achieve at least 95% of injured workers returning to health and meaningful work after 60 daysAchieve at least 70%of injured workers returning to health and meaningful work after 10 days84 WCB 2018 ANNUAL REPORTDELIVER EXCELLENT SERVICEMajor Initiatives:Enhance customer service throughout our organizationThe WCB is committed to continuously seeking out new and innovative ways to enhance service to our customers. The WCB will continue to develop comprehensive customer service initiatives, implementing recommendations from the customer journey maps for workers and employers, improving the overall customer service experience, and enhancing ways for customers to provide feedback.Improve customers’ experiences with our assessment processes and claim experienceThe WCB is committed to continuing to implement enhanced online services for employers including making improvements to online payroll reporting and implementing online account statements. For workers, the WCB is committed to improving the claim experience through improved communication methods and streamlined processes.Design and implement electronic healthcare reporting and billing Healthcare providers play a vital part in the recovery and return to work of injured workers. In order to improve the quality, timeliness and efficiency of reporting and billing processes, the WCB has launched a multi-year project to enable electronic healthcare reporting and billing from physiotherapists, chiropractors and doctors. Use business intelligence to continuously drive excellenceThe WCB is committed to continuously utilizing and enhancing our data analytic capabilities. Access to rich WCB data gives our organization timely information to support performance monitoring, strategic planning, and identify opportunities to further improve the service we provide to our customers. Evolve our technical infrastructure to support collaboration, innovation and mobilityThe WCB is committed to enhancing our technology to support strategic initiatives, collaboration, innovation and online capabilities. Improvements include modernizing and simplifying the technical infrastructure and improving the online applications available to external customers and stakeholders.Stakeholder outreach strategyThe WCB is committed to collaborating with partners and continues to reach out to stakeholders to deliver information and resources and gather feedback through new channels such as the Manitoba Chambers of Commerce AGM, the first ever WCB Return to Work Conference (in collaboration with the Manitoba Chambers), and the Winnipeg Chamber of Commerce’s Small Business Forum and Healthy Workplaces Program.Goal:• Strive to improve customers’ satisfaction with their WCB experience.WCB 2018 ANNUAL REPORT 85Maintain the accident fund reserve in keeping with the 130% funding ratio targetAchieve and maintain an average assessment rate at under$1Achieve at least 70% of claims paid within 14 days of injuryAchieve at least 80% in customer satisfaction of employers and injured workersFive Year Targets: In the five year period covered by this plan, the WCB is focused on the following milestones:86 WCB 2018 ANNUAL REPORTMajor Initiatives:Implement initiatives to engage employeesThe WCB is committed to increasing staff engagement and to enhancing collaboration to better serve our customers. The WCB conducts periodic employee surveys, recognizing the value of regularly soliciting input from staff and benchmarking and assessing corporate culture and engagement. The WCB continues in its efforts to implement its mental health strategy and initiatives, which incorporate ongoing education, training and awareness to staff and leaders with the aim to foster a workplace culture that is understanding and supportive of mental health issues and recognizes the importance of prevention in maintaining the health and well-being of our staff. Enhance our leadership developmentStrong leadership is essential to accomplishing organizational goals. The WCB will continue to support its leaders through training and development and by providing change management tools and strategies.Build skills and competencies to support our innovation cultureThe WCB is committed to finding new and better ways to provide service and to making our system more responsive, efficient and effective. The WCB will continue to implement agile innovation projects and support leaders in developing an innovation culture.Renew our physical work environmentThe WCB has developed a comprehensive office renewal plan to create a more effective workspace to meet the needs of our customers and gain organizational efficiency. The first phase of this multi-year renewal plan has been completed. The WCB plans to reassess and continue with the next phase of the renewal plan, which includes improvements to the remaining floors. GROW OUR PEOPLEGoal:• Attract, retain and develop our people to align with our evolving needs.Five Year Targets: In the five year period covered by this plan, the WCB is focused on the following milestones:Achieve at least 80% in employee engagementWCB 2018 ANNUAL REPORT 872019 – 2023 BUDGETED AND PROJECTED FINANCIAL STATEMENTS88The pro-forma financial statements for the years 2019-2023 present the financial outcomes of the strategic and operational plans of the WCB. The average assessment rate is maintained at $0.95 throughout the five year plan. A surplus distribution is planned commencing in 2019, with a goal of reducing the funding ratio toward the 130 per cent policy target. WCB revenues include:Premium revenue: this amount represents a combination of estimated annual assessable payroll and the average assessment rate, using reasonable assumptions for economic and inflationary growth. The average assessment rate used in the Five Year Plan is $0.95.Investment revenue: this amount represents a return that is consistent with the WCB’s investment portfolio profile. A steady rate of return of six per cent is used throughout the Plan, as it is not possible to predict investment markets. Actual results in this area will vary and fluctuations can be significant.WCB expenses include:Claim costs: this amount assumes the injury rate will decline during the Five Year Plan period and includes a reasonable assumption for cost inflation. Fluctuations in claim costs can occur if there is an increase to injury rates, very expensive claims, a change in the mix of old and new claims, or a change in average claim duration. Operating expenses: this amount represents salaries, employee benefits, infrastructure, the Appeal Commission, the Research and Workplace Innovation Program, SAFE Work Manitoba and administrative costs.88 WCB 2018 ANNUAL REPORTProforma Statement of Financial Position (unaudited)As at December 31 (in thousands of dollars)2018 Actual2019 Budget2020 Projection2021 Projection2022 Projection2023 ProjectionAssets$1,942,381$1,904,372$1,878,734 $1,850,831$1,881,535 $1,915,132Liabilities1,310,266 1,345,785 1,377,759 1,409,7121,440,068 1,470,990 Funded position632,115 558,587 500,975441,119 441,467444,142 $1,942,381$1,904,372 $1,878,734 $1,850,831 $1,881,535$1,915,132 Funding ratio148.2%141.5%136.4%131.3%130.7%130.2%Proforma Statement of Operations and Comprehensive Income (unaudited)For the years ending December 31 (in thousands of dollars)2018 Actual2019 Budget2020 Projection2021 Projection2022 Projection2023 ProjectionProjected average assessment rate$0.95$0.95$0.95$0.95$0.95$0.95Premium revenue$210,846 $219,709 $225,554 $229,811$232,735 $236,372 Investment income21,75789,42887,96086,82586,892 89,031Revenue232,603 309,137 313,514316,636 319,627 325,403 Claim costs incurred186,285204,721206,340 207,766207,626 209,196 Operating expenses99,542104,100 106,517108,716 111,653 113,532Total expenses285,827 308,821 312,857 316,482319,279 322,728Operating surplus(53,224)316657 1543482,675 Surplus distribution-(73,844)(58,269) (60,010)--Net surplus(53,224)(73,528)(57,612)(59,856)3482,675Other comprehensive income27,020-----Total comprehensive income$(26,204)$(73,528)$ (57,612)$ (59,856)$ 348$ 2,67589WCB 2018 ANNUAL REPORT 89Next >
< Previous6. INVESTMENT RISK MANAGEMENTIn accordance with the Statement of Investment Policy and Objectives, the investment objective of the WCB is to generate a consistent, positive, real rate of return on invested assets. Recognizing the need to achieve a balance between risk and return, investment risk is managed through a portfolio that is diversified across a number of distinct asset classes.The following sections describe the nature and extent of financial risk exposure and the related risk mitigation strategies.Market RiskThe WCB invests in publicly and privately traded equities and fixed income instruments available on domestic and foreign exchanges. As these securities are affected by market changes and fluctuations, the WCB is exposed to market risk as a result of price changes due to economic fluctuations in capital markets. The following table presents the effect of a material adverse change in the key risk variable – the sector benchmark – for each of the equity mandates in the WCB investment portfolio. Standard deviations are based on historical values for the past five years of market benchmark indices ending on December 31.one standard deviationEquities20182017% decrease in benchmark Estimated loss in fair value - Canadian9.6% $25.6 million 8.2% $23.9 million % decrease in benchmark Estimated loss in fair value - U.S.9.7% $20.0 million 9.8% $26.7 million % decrease in benchmark Estimated loss in fair value - Global10.7%$18.3 million10.9% $16.8 million% decrease in benchmark Estimated loss in fair value - Emerging markets11.7%$5.6 million11.0% $5.4 million Credit Risk Management Credit exposure on fixed income securities arises from the possibility that the issuer of an instrument fails to meet its obligation to make interest payments and repay principal. To mitigate the risk of credit default, the minimum quality standard for individual bonds and debentures at time of purchase is BBB, as rated by an established bond rating service. To further mitigate this risk, bonds with a BBB rating are limited to a maximum of 15 per cent of the bond portfolio. The balance of the portfolio should be invested in bonds with a minimum rating of A or higher.In addition to directly owned fixed income securities, the WCB is invested in a pooled bond fund. The pooled fund guidelines require that the average credit quality of the pooled fund’s assets must be BBB- or higher, and that non-investment grade securities shall not exceed 25 per cent of the pooled fund’s assets on a market value basis.Of the fixed income assets in the investment portfolio, 78 per cent (82 per cent in 2017) have at least an A credit rating. The WCB does not anticipate that any borrowers will fail to meet their obligations.Securities LendingThe WCB may lend, for fee income, any of its securities to third parties, provided the loans are secured by cash or readily marketable securities having a market value of at least 105 per cent of the market amount of the asset borrowed. As at December 31, 2018, these loans amounted to $217.2 million ($233.8 million in 2017). As at December 31, 2018, total collateral pledged to the WCB amounted to $228.3 million ($245.6 million in 2017). 60 WCB 2018 ANNUAL REPORTForeign Exchange Risk ManagementThe WCB has certain investments denominated in foreign currencies, which exposes the WCB to foreign currency risk. During 2018, the WCB did not undertake hedging strategies for the currency risk of foreign investments. While currency fluctuations influence short term returns, these fluctuations are not expected to affect the long term position of the investment portfolio.The WCB has exposure to the U.S. dollar (USD), with USD-denominated holdings of $313.5 million Canadian dollar (CAD) ($372.7 million CAD in 2017) or 18.6 per cent of the portfolio (21.3 per cent in 2017).The table below presents the adverse effects of a 10 per cent appreciation in the Canadian dollar versus the U.S. dollar exchange rate:20182017Estimated loss in fair value$28.5 million$33.9 millionInterest Rate Risk Management The WCB is exposed to interest rate risk to the extent that the fair value or future cash flows of a financial instrument fluctuate due to changes in market interest rates. These fluctuations are managed by actively controlling the duration of the fixed income portfolio. As at December 31, 2018, the duration of the WCB’s bond portfolio was 7.7 years (7.6 years in 2017).The following table shows the effects of a negative 100 basis point (where one basis point equals 1/100 of one per cent) change in interest rates on the bond portfolio: 20182017Estimated loss in fair value of bonds$41.1 million$39.4 millionThe WCB is also subject to interest rate risk through the wholly owned subsidiary WCB Realty Limited. The mortgages payable on investment properties are primarily fixed rate mortgages which do not create cash flow risk.Liquidity Risk Management Liquidity risk is the risk that the WCB will be unable to meet its financial obligations. To manage this risk, and avoid liquidation of portfolio assets under unfavourable conditions, the WCB maintains two credit facilities as discussed in Note 3.WCB 2018 ANNUAL REPORT 617. 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:20182017Balance at beginning of year$141,527 $136,951 Increase in future cost liability 4,258 4,550 Decrease in pension-related transactions (605) (1,413)Interest allocation (7) (40)Increase in deferred assessments (Note 15) 3,646 3,097 Current pension surplus included in receivables and other 371 1,479 Balance at end of year$145,544 $141,527 62 WCB 2018 ANNUAL REPORT8. PROPERTY AND EQUIPMENTAccounting policyProperty and equipment are valued at cost, less accumulated amortization and any 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 at a value in excess of the recoverable amount. The changes in property and equipment were as follows:20182017Building and landBuilding renovations and leaseholdsComputer equipmentFurniture, fixtures and equipmentTotalTotalCostAs at January 1$24,377 $ 8,411 $ 9,876 $ 4,568 $ 47,232 $ 43,203 Additions 3,163 3,324 846 1,196 8,529 4,374 Disposals-- (262) (286) (548) (345)As at December 31 27,540 11,735 10,460 5,478 55,213 47,232 AmortizationAs at January 1 (3,829) (4,229) (7,739) (3,342) (19,139) (16,317)Amortization charge (867) (1,262) (1,207) (511) (3,847) (3,167)Disposals- - 253 286 539 345 As at December 31 (4,696) (5,491) (8,693) (3,567) (22,447) (19,139)Net book value, as at December 31$22,844 $ 6,244 $ 1,767 $ 1,911 $ 32,766 $ 28,093 WCB 2018 ANNUAL REPORT 639. 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 computer 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 at a value in excess of the recoverable amount. The changes in intangible assets were as follows:20182017Computer softwareInternally developed systems and softwareTotalTotalCostAs at January 1$ 4,471 $ 21,881 $ 26,352 $ 23,452 Additions 236 2,819 3,055 4,112 Disposals (3) (6) (9) (1,212)As at December 31 4,704 24,694 29,398 26,352 AmortizationAs at January 1 (4,156) (12,809) (16,965) (16,437)Amortization charge (210) (1,791) (2,001) (1,740)Disposals - 6 6 1,212As at December 31 (4,366) (14,594) (18,960) (16,965)Net book value, as at December 31$338$ 10,100 $10,438 $ 9,387 64 WCB 2018 ANNUAL REPORT10. 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 expected to be settled before the end of the next reporting period.Payables and accruals are comprised of:20182017Accounts payable and accrued liabilities$ 5,597 $ 8,610 Research and Workplace Innovation Program 2,469 2,472 Deposits from self-insured employers 5,363 5,995 Other payables 1,327 1,417 Balance at end of year$ 14,756 $ 18,494 11. 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:20182017Balance as at January 1$ 33,701 $ 31,245 Investment income 413 2,483 WCB contributions 1,717 1,669 Workers' contributions 515 475 Benefits paid (2,159) (2,171)Balance as at December 31$ 34,187 $33,701 WCB 2018 ANNUAL REPORT 6512. 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 is a defined benefit plan. Eligible retirees receive a predetermined annual credit amount which may be used to cover healthcare expenses not covered by other plans. 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.66 WCB 2018 ANNUAL REPORTThe 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.Discount 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:20182017Retirement plans$93,475 $ 109,799 Sick leave plan 12,352 12,760 Employee vacation entitlements 4,618 4,723 Retiree healthcare spending account 2,622 2,583 Other 1,024 589 As at December 31$ 114,091 $ 130,454 The key actuarial assumptions used to value the employee benefit liabilities for accounting purposes are as follows:20182017Discount rate4.00%3.50%Rate of compensation increase3.50%3.50%WCB 2018 ANNUAL REPORT 67Retirement plan A reconciliation of the retirement plan net defined benefit liability and its components is as follows:Defined Benefit ObligationFair Value of Plan AssetsNet Defined Benefit LiabilityNet Defined Benefit Liability20182017Balance at January 1$ 323,828 $(214,029)$ 109,799 $77,911 Benefit cost recognized in income:Current service cost 14,705 - 14,705 13,077 Interest expense (income) 11,229 (7,533) 3,696 2,948 Employee contributions - (3,612) (3,612) (3,619) 25,934 (11,145) 14,789 12,406 Remeasurements recognized in OCI:Experience (gain) loss (3,976)- (3,976) 1,755 (Gain) loss from changes in actuarial assumptions (29,594)- (29,594) 31,438 Return on plan assets excluding interest income- 7,215 7,215 (8,911) (33,570) 7,215 (26,355) 24,282 Other changes:Employer contributions- (4,758) (4,758) (4,800)Transfers to the plan 869 (869)--Benefits paid (6,828) 6,828 -- (5,959) 1,201 (4,758) (4,800)Balance at December 31$310,233 $ (216,758)$ 93,475 109,799 The most recent actuarial valuation of the WCB Retirement Plan for funding purposes, to be filed with the pension regulators, was as at December 31, 2018. This funding valuation showed a funding deficit of $4.9 million (2017 valuation, surplus of $4.4 million). The solvency deficit as at December 31, 2018 was $106.6 million (2017 valuation, deficit of $97.6 million). The WCB is not required to fund this deficiency as the WCB is exempt from the solvency and transfer deficiency provisions of the Pension Benefits Act.The fair value of the retirement plan assets as at December 31 is: 20182017EquityCanadian$ 53,865 $53,804 Foreign (including US) 64,927 64,111 118,792 117,915 Fixed income 53,450 53,079 Real estate 44,516 43,035 As at December 31$216,758 $214,029 68 WCB 2018 ANNUAL REPORTThe retirement plan assets are wholly invested in segregated funds. The fair value represents the retirement plans’ share of the net asset value provided by the custodian and is based on the last market price for the underlying assets. At December 31, 2018, plan assets are categorized as Level 1 with the exception of certain fixed income investments which are categorized as Level 2. Sick leave plan A reconciliation of the sick leave plan net defined benefit liability (equal to the defined benefit obligation) is as follows:20182017Balance at January 1$ 12,760 $ 12,031 Benefit cost recognized in income:Current service cost 661 605 Interest expense 430 464 1,091 1,069 Remeasurements recognized in OCI:Experience gain(11) (11)(Gain) loss on change in actuarial assumptions (514) 522 (525) 511 Benefits paid directly by the employer (974) (851)Net defined benefit liability at December 31$ 12,352 $ 12,760 WCB Retiree Healthcare Spending Account (RHCSA)Details of the WCB RHCSA are as follows:20182017Balance at January 1$2,583 $2,188Benefit cost recognized in income: Current service cost 118 102Interest expense 90 87 208 189Remeasurements recognized in OCI:(Gain) loss on change in actuarial assumptions (140)224Employer contributions (29) (18)Change in net defined benefit liability39 395Net defined benefit liability at December 31$ 2,622 $ 2,583 Defined benefit plan risksThe defined benefit plans expose the WCB to economic and demographic actuarial risk.Economic riskThe retirement plan is exposed to investment risk as plan assets are invested in equity, fixed income and other assets. The defined benefit plans are exposed to interest rate risk through assumptions based on economic factors such as discounts determined with reference to bond markets. Demographic riskDemographic factors affect current and future benefits costs with respect to the amount and timing of expected payments. Demographic factors include average age, retirement rates and longevity. WCB 2018 ANNUAL REPORT 69Next >