Asset Replacement Component

October 7, 1997 - February 21, 2005

FN-14

General Information

The Compensation Fund operates on the principle of collective liability. This means Yukon employers pool the risk and share the costs of work-related disabilities.

In accordance with the Funding Policy, the Asset Replacement Component is a component of the 'Potential Liability and Asset Replacement Reserve." The Asset Replacement Component provides funding and minimizes borrowing to purchase new assets or to replace existing assets when their life is over. The Board approves the appropriate minimum and maximum levels of the Asset Replacement Component.

The board maintains the "Potential Liability and Asset Replacement Reserve" to provide funding to cover the costs of: claims disasters; unknown disabilities such as occupational diseases or enhanced disabilities; asset replacement; and rate stabilization. The Reserve is used to provide protection to employers against any adverse financial experience that could unduly burden employers.

Any operating surplus or deficit is first charged to the rate stabilization component. Any positive balance in the rate stabilization component is allocated in the following order of priority:

Provision for Claims Disasters Component 20 % of benefits liability

Provision for Unknown Disabilities Component:
occupational disease or enhanced disability 20 % of claims disasters

Provision for the capital Asset Replacement Component equals the accumulated asset amortization.

If the provision for the Rate Stabilization Component falls to a level where there is insufficient funds to make all of the above allocations, then allocation is made until the Rate Stabilization Component equals zero. If an operating deficit causes the Rate Stabilization Component to be negative before any allocations are made, then funds are reallocated back to the Rate Stabilization Component until it equals zero. This is done by reducing the other components, listed above, in reverse order of priority.