The residual portion of levies funds the ongoing costs of injuries to all earners (including self-employed) that occurred during a period where we did not fully fund claims.
What are the periods?
The periods where we did not fully fund claims are:
- in the workplace between 1 April 1974 and 30 June 1999
- outside of the workplace (ie non-work injuries) between 1 April 1974 and 30 June 1992.
Who is the residual portion of levies paid by?
The residual portion of the Work Account levy is paid by all employers and the self-employed, based on their previous year’s payroll or earnings.
The residual portion of levies was set up as a consequence of changes to ACC legislation during 1999 that saw the scheme move from a ‘pay-as-you-go’ funding basis to a ‘full funding’ basis.
Full funding
Full funding means that we collect enough money during each levy year to cover the full lifetime costs of every claim that occurs in that year. Some claims have lifetime costs that run for over 30-40 years, so significant investment reserves are created to fund these ongoing costs.
Prior to 1999, ACC levies covered only the claims costs that were actually paid out during the year. As a consequence, ACC built up long-term liabilities for claims that were not matched by investment reserves.
The residual portion of levies was established to build investment reserves to match these existing liabilities by 30 June 2019. Once this has been achieved, the residual portion of levies will no longer be collected.
There are also residual portions included in the levies for the Motor Vehicle, Earners’ and Non-Earners’ Accounts. This will continue until 30 June 2019, when enough money will have been collected and held in reserve to continue paying the ongoing costs of these pre-1999 claims.
In 2005 the funding for work-related gradual process claims was changed. The funding of these claims is now based on the period of exposure rather than the date of claim. This means the residual portion of levies will now also fund newly reported work-related gradual process claims where exposure occurred prior to 1 July 1999.
Last updated: 23 June 2010