ACC moved to a system of fully funding the lifetime costs of an injury claim in 1999. Prior to this, levies covered only the current costs of a claim. Residual levies are required to pay for ongoing costs of earlier injuries. The ACC Scheme is currently required to be fully funded by 30 June 2014.
What are residual levies?
Before ACC moved to a fully funded basis in 1999, levies were paid on a ‘pay as you go’ basis. That meant levies only covered the current costs of existing claims.
As a result, we still need to collect levies to pay for the ongoing costs for injuries that happened before 1999. These are called residual (or pre-1999) levies and are required until 2014. By then, the future costs of these residual claims will be fully funded.
Residual levies are for:
- work-related injuries that occurred before 1 July 1999, and non work-related injuries to earners that occurred before 1 July 1992. (This is the Residual Claims levy that is used to help fund the Residual Claims Account.)
- non work-related injuries to earners that occurred between 1 July 1992 and 30 June 1999. (This is the Earners’ Account Residual levy that is used to help fund the Earners’ Account.)
- motor vehicle injuries that occurred before 1 July 1999. (This is the Motor Vehicle Account Residual levy that is used to help fund the Motor Vehicle Account.)
Work-related gradual process, disease or infection claims before 1 July 1999
In 2005, the funding basis of claims for personal injuries caused by work-related gradual process, disease or infection changed. Funding had been based on the date the claim was made, but this changed to funding being based on the period of exposure.
As a result, the Residual Claims Account now also funds newly-reported work- related gradual process, disease or infection claims where exposure occurred before 1 July 1999.
Who pays residual levies?
Work-related and non work-related residual levies are paid by all employers, self-employed people and earners, based on their previous year’s payroll or earnings.
Work-related residual levies are variable for each industry, but non work-related residual levies are spread at a flat or uniform rate across all industries.
Motor vehicle owners and users pay the motor vehicle residual levy through their vehicle registration.
What is full funding?
We are required to ensure that all levied ACC Accounts have enough funds to provide for future costs – that is, they are fully funded - even when we don’t know precisely what those costs will be.
Some claims have costs that run for over 30 to 40 years, so we have significant investment reserves to fund these ongoing costs.
Because we cover costs on a fully funded basis, we have to collect enough money during the year to cover the full costs over the life of every claim. That means we have to cover not only the costs during the year in which the injuries occur, but also the ongoing costs in future years.
Estimating the costs
Simple injuries, such as a sprained wrist, involve estimating the costs for only a few months. We can be more certain of these costs.
For something more serious, such as a permanent disability, we may have to estimate the costs for many years into the future. These costs are less certain.
For more information, see How we are funded
Last updated: 15 December 2008