Part 10Scheme adjustment mechanisms

Part 10—Scheme adjustment mechanisms 168—Preliminary (1) In this Part— funding level means the percentage obtained by taking the value of the total assets of the Corporation and dividing those by the value of the total liabilities of the Corporation, as determined at the end of a financial year and by applying any relevant provision of the prescribed standard and as reported in the Statement of Financial Position of the Corporation in its annual report for that financial year; prescribed standard means the Australian Accounting Standards Board— AASB Standard 1023. (2) For the purposes of this Part, a probability of sufficiency will be determined under the prescribed standard. (3) For the purposes of this Part, an assessment of whether a profit or loss may arise from the insurance operations of the Corporation in respect of a financial year will be determined according to the total comprehensive result reported in the Statement of Comprehensive Income of the Corporation in its annual report, adjusted by the long term investment earnings rate and any relevant economic assumptions for investment profit and the cost of claims. 169—Scheme adjustment/review events (1) For the purposes of this section, a scheme adjustment/review event occurs if— (a) in respect of each of 2 consecutive financial years— (i) the Corporation has achieved a funding level of at least 100% at a probability of sufficiency of 75%; and (ii) the Corporation has achieved a profit from its insurance operations; and (b) an actuary reporting on the Corporation's funding level has made a statement under subsection (2). (2) The statement envisaged by subsection (1)(b) is that, if a scheme bonus period were to be declared under this section in relation to a specified financial year— (a) that the financial position of the scheme established by this Act would not be expected to fall below a funding level of 100% at a probability of sufficiency of 75%; and (b) that a funding level of at least 100% at a probability of sufficiency of 75% is considered sustainable over the short to medium term. (3) If the Minister is satisfied, on the basis of information contained in the Corporation's annual reports for 2 consecutive financial years and a statement provided under subsection (1)(b), that a scheme adjustment/review event has occurred— (a) unless paragraph (b) applies—the Minister must, by notice in the Gazette, declare a scheme bonus period in relation to the financial year that next follows the financial year immediately succeeding the second of those 2 consecutive financial years; or (b) if it appears to the Minister that a declaration of a scheme bonus period would result in the average premium rate falling below 1.25%—the Minister must initiate a review of the scheme under subsection (7) (and a scheme bonus period cannot be declared under this section until that review has been completed). (4) If a scheme bonus period is declared under subsection (3)(a), the board must, in consultation with the Minister, determine an amount that is to be made available for distribution under subsection (5) (the prescribed distribution amount) subject to the qualification that the prescribed distribution amount must take into account factors relevant to the financial liabilities of the Corporation and must not be an amount that would cause, in the assessment of the board— (a) the financial position of the scheme established by this Act to fall below a funding level of 100% at a probability of sufficiency of 75% in respect of the relevant financial year; or (b) a loss from the Corporation's insurance operations in respect of the relevant financial year; or (c) a material risk to the ability of the Corporation to achieve a sustainable funding level of at least 100% at a probability of sufficiency of 75% over the short to medium term. (5) The prescribed distribution amount will be distributed as follows: (a) half of the amount must be paid into a separate part of the Compensation Fund called the Return to Work Facilitation Fund; and (b) half of the amount must be applied by the Corporation so as to achieve a reduction in premiums payable under Part 9 Division 4 in respect of the relevant financial year. (6) An amount standing to the credit of the Return to Work Facilitation Fund will be applied by the Corporation towards— (a) programs designed to assist workers— (i) who suffer work injuries; but (ii) who do not achieve a return to suitable employment after they have recovered (at least to some extent) from any resultant incapacity for work, to develop skills, knowledge, capacity and capabilities that will enable them to transition into employment or work that is reasonably suited to their circumstances; and (b) other programs or initiatives approved by the Minister that will benefit workers who have suffered work injuries. (7) If the Minister initiates a review of the scheme under subsection (3)(b)— (a) the review must be undertaken by a person appointed by the Minister after consultation with the Corporation; and (b) the review must examine— (i) the level of benefits payable to workers under this Act, and the extent or level of services available or provided to workers under this Act, and the extent to which it would be fair and appropriate to increase benefits or services by the amendment of this Act; and (ii) the costs of employers on account of payments of premiums under Part 9 Division 4 and the impact on premiums of any increase to the level of benefits or services available or provided to workers under this Act; and (iii) the sustainability of the Compensation Fund over the short to medium term; and (iv) any other matter determined by the Minister; and (c) the review must be completed within 12 months of the scheme adjustment/review event. (8) On the completion of a review under subsection (7)— (a) the outcome of the review must be embodied in a written report; and (b) the Minister must cause a copy of the report to be laid before both Houses of Parliament within 12 sitting days after receiving the report. (9) To avoid doubt, nothing in this section prevents a series of declarations being made under subsection (3)(a) in relation to rolling periods of consecutive financial years (provided that the other requirements of this section have been satisfied so that such a declaration may be made). 170—Scheme funding/review events (1) For the purposes of this section, a scheme funding/review event occurs if in respect of each of 2 consecutive financial years the Corporation has been operating at a funding level below 90% at a probability of sufficiency of 75%. (2) If the Minister is satisfied on the basis of information contained in the Corporation's annual reports for 2 consecutive financial years that a scheme funding/review event has occurred, the Minister must initiate a review of the scheme under subsection (3). (3) If the Minister initiates a review of the scheme under this section— (a) the review must be undertaken by a person appointed by the Minister after consultation with the Corporation; and (b) the review must examine— (i) the level of benefits payable to workers under this Act, and the extent or level of services available or provided to workers under this Act; and (ii) the costs to employers on account of payment of premiums under Part 9 Division 4 and the extent to which it would be appropriate to increase the average premium rate (including by the amendment of this Act to change the percentage specified in section 137); and (iii) the sustainability of the Compensation Fund over the short to medium term; and (iv) any other matter determined by the Minister; and (c) the review must be completed within 12 months of the scheme funding/review event. (4) On the completion of a review under this section— (a) the outcome of the review must be embodied in a written report; and (b) the Minister must cause a copy of the report to be laid before both Houses of Parliament within 12 sitting days after receiving the report.