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Calculation of Interest

2001/10/15-03

THE WORKERS' COMPENSATION BOARD OF BRITISH COLUMBIA

RESOLUTION OF THE PANEL OF ADMINISTRATORS

Re: Calculation of Interest

---

WHEREAS:

Pursuant to Section 82 of the Workers Compensation Act, RSBC 1996, Chapter 492 and amendments thereto ("Act"), the Panel of Administrators ("Panel") must approve and superintend the policies and direction of the Workers' Compensation Board ("Board"), including policies respecting compensation, assessment, rehabilitation and occupational safety and health, and must review and approve the operating policies of the Board;

AND WHEREAS:

The Board's policy regarding interest on retroactive payments of compensation is provided in policy item #50.00 of the Rehabilitation Services and Claims Manual;

AND WHEREAS:

Interest is provided on retroactive wage-loss and pension lump-sum payments where the benefit is for a condition which was previously overlooked or for which the Board previously decided that no payment was due;

AND WHEREAS:

Board policy provides a monthly compound rate of interest that is equal to the average rate of return on the Board's total investment portfolio;

AND WHEREAS:

The same interest rate is also used with respect to assessment and prevention matters;

AND WHEREAS:

The Policy and Regulation Development Bureau has conducted extensive consultation with stakeholders regarding the appropriate criteria for entitlement to interest and the method of payment calculation;

THE PANEL OF ADMINISTRATORS RESOLVES THAT:

1. Policy item #50.00 of the Rehabilitation Services and Claims Manual is amended to provide simple interest at a rate equal to the prime lending rate of the banker to the government (i.e., the CIBC). Policy item #50.00 is also amended to restrict the period of time interest may accrue to a maximum period of twenty years.
2. Policy item #50.00 is also amended to provide new criteria for determining when it is appropriate for the Board to pay interest in situations other than those expressly provided for in the Act. The amended policy will provide for interest on retroactive wage-loss and pension lump-sum payments where it is determined that a blatant Board error necessitated the payment. For an error to be "blatant" it must be an obvious and overriding error.
3. Policy items #48.42 and #105.30 of the Rehabilitation Services and Claims Manual are amended to provide consistency with the amendments to policy item #50.00.
4. Policy No. 40:70:40 of the Assessment Policy Manual is amended in order to provide consistency with the amendments to policy item #50.00 of the Rehabilitation Services and Claims Manual.
5. The amendments to policy items #50.00, #48.42 and #105.30 of the Rehabilitation Services and Claims Manual and policy no. 40:70:40 of the Assessment Policy Manual, as attached, are approved. If there is any inconsistency between the wording in the general wording of items 1 - 4 inclusive of this Resolution and the specific wording in the attachments hereto, the wording in the attachments shall prevail.
6. The amended policies are effective November 1, 2001, and will apply to all decisions to award or charge interest on or after that date. When calculating the amount of interest payable, the new method for determining the applicable rate of interest will apply retrospectively and will be used for the entire entitlement period and will not be limited to entitlement for time periods after November 1, 2001.
   

DATED at Richmond, British Columbia, October 15, 2001.

	By the Workers' Compensation Board
	MAUREEN NICHOLLS, CHAIR PANEL OF ADMINISTRATORS

APPENDIX 1

REHABILITATION SERVICES & CLAIMS MANUAL

PROPOSED AMENDMENTS

[Deletions Struck Through, Additions in Bold]

#50.00 Interest

Effective May 7, 1984, interest is paid to workers or employers on retroactive wage-loss and pension lump sum payments subject to the following conditions.

1. The decision to award interest is made by the Claims Adjudicator, Disability Awards Officer or Adjudicator in Disability Awards, as the case may be.
2. Interest is paid when the wage loss or pension is for a condition which was previously overlooked or for which the Board previously decided that no payment was due.
3. No interest is paid unless the commencement date of the retroactive benefits is more than one year prior to the date the retroactive payment is being processed. Interest is calculated from the first day of the month following the commencement date of the retroactive benefits.
4. For each year in respect of which compensation is retroactively paid the rate of interest will equal the average return on the Board's total investment portfolio for the preceding year.

The annual effective compound rate of interest used with respect to retroactive wage loss and pension/cash award payments will be:

1998	11.40% (for calculations made after March 31, 1998)
1999	11.30% (for calculations made after March 31, 1999)
2000	12.6% (for calculations made after March 31, 2000)
2001	10.6% (for calculations made after March 31, 2001)

If required, earlier figures may be obtained by contacting the Board.

The interest rate applicable to the preceding year will be used for any period in the current year where the new rate has not yet been established.

Interest will be calculated up to the end of the month preceding the decision date.

For practical reasons, certain mathematical approximations will be used in the calculations.

The above principles are applied to all cases where full processing has not been completed by May 7, 1984.

These rates of interest are also used in the calculation of overpayments as outlined in #48.42.

With respect to compensation matters, the Act provides express entitlement to interest only in the situations covered by sections 19(2)(c) and 92(3). In these situations, the Board will pay interest as provided for in the Act (see policy items #55.62 and #105.30).

The Board has discretion to pay interest in situations other than those expressly provided for in the Act. In these situations, interest may be paid subject to the following conditions:

• The retroactive payment is to a worker or employer in respect of a wage-loss payment (provided under sections 29 and 30 of the Act) or a pension lump-sum payment (provided under sections 22 and 23 of the Act).
• It has been determined that there was a blatant Board error that necessitated the retroactive payment. For an error to be "blatant" it must be an obvious and overriding error. For example, the error must be one that had the Board officer known that he or she was making the error at the time, it would have caused the officer to change the course of reasoning and the outcome. A "blatant" error cannot be characterized as an understandable error based on misjudgment. Rather, it describes a glaring error that no reasonable person should make.
• Interest will be calculated from the first day of the month following the commencement date of the retroactive benefit and up to the end of the month preceding the decision date. Notwithstanding, in no case will interest accrue for a period greater than twenty years.

In all cases where a decision to award interest is made, the Board will pay simple interest at a rate equal to the prime lending rate of the banker to the government (i.e., the CIBC). During the first 6 months of a year interest must be calculated at the interest rate as at January 1. During the last 6 months of a year interest must be calculated at the interest rate as at July 1.

For practical reasons, certain mathematical approximations may be used in the calculations.

The rate of interest provided in this policy will also be used in the calculation of overpayments as outlined in #48.42.

APPENDIX 2

REHABILITATION SERVICES & CLAIMS MANUAL

PROPOSED AMENDMENTS

[Deletions Struck Through, Additions in Bold]

#48.42 Recovery Procedures for Overpayments

If, at the time of the discovery of the overpayment, payments are still being made on the claim, the amount of any overpayment will be recovered from those payments. The Board officer will as far as possible do this in a manner which causes the least hardship to the worker. Normally, the Board officer will recover the amount owing by instalments. If payments of the claim are terminated by the time the overpayment is discovered or before full recovery can be obtained, the procedures outlined below are followed. If an appeal against the overpayment is lodged however, re-collection procedures are as outlined in #48.46.

1. The Vocational Rehabilitation Services and Claims Departments will conduct the initial collection procedure which will include the Board officer making personal contact with the claimant in addition to sending two letters, one immediately and one 30 days later. For overpayments in excess of $500, the second letter advises that unpaid accounts will be turned over to the Board’s Collections Section.
2. When the overpayment is 70 days overdue it will be sent to the Board’s Collections Section. Unless there is evidence of fraud or misrepresentation, claims for overpayments under $500 are not sent to Collections.
3. A letter will be sent to the claimant by a Collections Officer at the 70-day overdue date indicating that the overpayment has been transferred to the Board’s Collections Section and suggesting that payment be made within a month in order to avoid possible legal action. This letter will make it clear that the Board is serious about collecting the overpayment.
4. If payment is not received within 30 days, or a reasonable payment plan arranged, the Collections Officer will attempt to make telephone contact with the claimant or pay a personal visit.
5. If this does not result in positive arrangements for payment, a final, more strongly worded letter will be sent. An asset search will be conducted and if there is a reasonable expectation that money is collectible, the account will be turned over to the Board’s Legal Services Division for attention and action. The result of this action could be the seizing of assets or garnisheeing wages.

Item #50.00 sets out the procedures regarding the crediting of interest to retroactive wage-loss and pension payments. There is no time limit on the awarding of compound interest. To be equitable, the same principle is applied to the charging of interest on monies owed to the Board. In the case of claims overpayments, interest charges only apply to amounts due where the overpayment is the result of fraud, misrepresentation or the withholding of information by the worker. Interest is not charged on overpayments that result from the correction of an error. The charging of interest on an overpayment must be approved by a Manager or a Director.

In the case of doctors and other health care benefit payees, overpayments are handled by the Board by making a deletion from future payments. There is no attempt by the Board to obtain the recovery of such an overpayment from a worker who received the health care benefits unless the costs of the health care benefits were paid directly to the worker.

APPENDIX 3

REHABILITATION SERVICES & CLAIMS MANUALPROPOSED AMENDMENTS

[Deletions Struck Through, Additions in Bold]

105.30 Implementation of Review Board Findings

Section 92 provides as follows:

1. "Where a claim is allowed by the review board, periodic payments must commence, and a lump sum under section 17(13) must be paid; and an amount so paid is not, in the absence of fraud or misrepresentation, recoverable from the worker or dependants.
2. Notwithstanding subsection (1), where a finding of the review board is appealed under section 91 or reopened or reheard under section 96, payment of any compensation that has not yet been paid with respect to the period prior to the finding of the review board must be deferred until the date on which the appeal division makes its decision or redetermination under section 91 or 96, as the case may be.
3. If the appeal division decision is in favour of the worker or his dependants, interest

1. calculated in accordance with the policies of the governors, and

2. beginning 31 days after the date on which the review board made its finding or beginning on an earlier day determined in accordance with the policies of the governors must be paid on compensation that has been deferred under subsection (2)."

The procedures for implementing all review board findings are as follows:

1. Any benefits payable from the date of the review board finding forward will be paid without delay.
2. Any benefits payable for the period of time prior to the date of the review board finding (retroactive benefits) will be paid after 30 days have elapsed following the date of the review board finding unless:
1. the President has referred the review board finding to the Appeal Division under Section 96(4); or
2. an appeal has commenced from the finding under Section 91.
3. If there is a referral to the Appeal Division by the President under Section 96(4) or an appeal of the finding under Section 91 retroactive benefits will not be paid until the Appeal Division has completed its consideration of the matter.
4. The decision of the Appeal Division will be implemented upon its receipt by the Board officer. The worker’s entitlement to retroactive benefits which were deferred according to #3 above will then be determined in accordance with the decision of the Appeal Division.
5. Where retroactive benefits are payable, after the decision of the Appeal Division, interest is to be paid in accordance with the Board’s general policy on the payment of interest on retroactive benefits as set out in #50.00. However, where no interest is payable under #50.00 because the commencement date of the retroactive benefits is less than one year prior to the date the retroactive benefits are being processed, interest will be paid it is determined that the retroactive benefit was not necessitated by a blatant Board error, interest will be paid beginning 31 days after the date on which the review board made its finding. The amount of interest to be paid is to be calculated in accordance with the interest rates set out in #50.00.

The implementation of review board findings which result in a lump-sum payment or commutation is discussed at #45.61.

APPENDIX 4

ASSESSMENT POLICY MANUAL

PROPOSED AMENDMENTS

[Deletions Struck Through, Additions in Bold]

ASSESSMENT OPERATING POLICY		POLICY NO. 40:70:40
		PAGE 1 OF 1
SUBJECT: INTEREST REBATES AND INTEREST ON APPEALS		DATE: OCT/98 NOV/01
		REPLACES ISSUE DATED: JUN/93 OCT/98

Where an overpayment of assessment has resulted from a blatant Board error, the firm may be entitled to accrued interest on the amount overpaid. This adjustment would also apply to penalty assessments and accrued interest on outstanding assessments that were paid during the period in question.

For an error to be "blatant" it must be an obvious and overriding error. For example, the error must be one that had the Board officer known that he or she was making the error at the time, it would have caused the officer to change the course of reasoning and the outcome. A "blatant" error cannot be characterized as an understandable error based on misjudgment. Rather, it describes a glaring error that no reasonable person should make.

An example of a blatant Board error that would entitle an employer to an interest rebate is where the employer is registered in an obviously incorrect classification; for example, a retail operation registered in the logging classification of industry when the employer correctly identified the industry at the outset. When an error of this nature is discovered, the individual should make a written recommendation to the Section Manager who, if in agreement, will forward it to the Director. The originating Section Manager will return this cheque to the employer with a registered letter explaining the refund.

Interest is also payable in cases where an employer prepays a penalty assessment (including an experience rating DEMERIT) pending an appeal to the Appeal Division and is then successful in the appeal.

If the recommendation to pay interest is approved, the employer will receive an interest rebate calculated on the adjusted assessment. The rate of interest will be the same as that used for claims overpayments or retroactive payments.

The interest applicable will be calculated by the Actuarial and Research Department. A memo will be sent to the Actuarial and Research Department setting out the amount of overpayment on each payment date. Actuarial will provide the total interest amount applicable from the various payment dates to the current month.

Where an employer is granted relief under Section 39(1)(e) with respect to a claim where wage loss payments concluded, or a pension was awarded, after March 15, 1978 and on or before December 31, 1993 and on which the employer made a request in writing for the Board to consider the application of Section 39(1)(e), interest is payable on any refund from the date of the employer’s request for relief.

Subject to the above provisions, where an amount is returned to an employer as a result of a successful appeal to the Appeal Division under Section 96(6) or (6.1) of the Act, interest is payable from the date the employer files the notice of appeal with the Appeal Division.

Notes:

In all cases where a decision to award interest is made, the Board will pay simple interest at a rate equal to the prime lending rate of the banker to the government (i.e., the CIBC). During the first 6 months of a year interest must be calculated at the interest rate as at January 1. During the last 6 months of a year interest must be calculated at the interest rate as at July 1.

Where an overpayment of assessment has resulted from a blatant Board error, interest will not accrue for a period greater than twenty years.

For practical reasons, certain mathematical approximations may be used in the calculations.

The interest reflects the average interest yield on investments of the WCB for each year, which is the same rate that is paid on compensation matters.