Capitalization of Claims
Effective date: May 1, 2010
Application: Long-term earnings replacement claims
Policy subject: Employer accounts – Claims costs adjustments and cost relief
To establish the guidelines to capitalize a claim receiving long-term earnings replacement.
The Workers' Compensation Board (WCB) has approved POL 14/2010, Capitalization of Claims to establish the guidelines for the capitalization of claims receiving long-term earnings replacement (LTER) payments.
- Where LTER is implemented under POL 01/2018, Benefits – Long-Term Earnings Loss, capitalization will be applied the following month in most situations except for the following:
- where the worker has a decreasing staged earnings replacement which is expected to result in the elimination of earnings loss; or.
- where the LTER is expected to be paid for a period of less than one year; or.
- where the worker has a staged earnings replacement with ongoing LTER, the operations staff will delay capitalization until staging is complete and the LTER has stabilized.
- Where it has been determined that the claim should be capitalized, the file will be referred to the operations staff.
- The operations staff will ensure the information is placed on file and the net present value amount is calculated to determine the amount of funds to be set aside in order to pay for the expected wage loss in the future until the worker has reached age 65. Medical and rehabilitation costs will not be capitalized.
- The net present value amount of the injured worker’s future LTER benefits will be charged to the employer’s cost experience as a capitalized cost in the year the amount is determined.
- For experience rating purposes, Employer Services will include this capitalized amount in the employer’s cost experience. However, the total cost used in the calculation will be limited to an amount equal to the maximum assessable wage. Policy POL 27/2016, Experience Rating Program – Discounts or Surcharges, will apply.
- The operations staff will annually review and verify the worker’s earnings to determine if adjustments to the LTER benefits are required. If the LTER is adjusted on the basis of a review (POL 07/2016, Earnings Verification), the operations staff will adjust the capitalized amount.
- Where the capitalized amount is adjusted, any variance will be recorded in the employer’s cost experience in the year that it is applied.
- When LTER benefits are capitalized, the amount will be shown on the employer’s monthly cost statement in the month that it is applied. Since the future value of medical and rehabilitation costs cannot be projected, these costs will continue to be included in future cost statements.