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Agencies say they shouldn't have to pay off benefits deficit

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Agencies say they shouldn't have to pay off benefits deficit

Oct 10 2012

A group of agencies that work with vulnerable people is bracing for a legal battle with the B.C. government over the ballooning cost of employee benefits.

The agencies dispute the government's claim that they are responsible for a massive deficit racked up by the Healthcare Benefit Trust that administers their group benefits.

A number of agencies have left the non-profit trust and are refusing to pay "exit levies" representing their share of the deficit, which topped $17 million in 2011.

Others are threatening to leave and take the matter to court, according to the B.C. CEO Network, which represents about 80 agencies that provide services to adults with developmental disabilities. "Those that leave will no doubt be invoiced by the [trust] for the exit levy surcharge, and further, risk possible litigation," the network says in a position paper.

The network argues the government is responsible for the deficit because it forced service agencies to join the trust as part of a negotiated labour settlement in 1999. "We had no choice, no say, and at the time, government assured us that we would not get into this crisis that we find ourselves in today," said Ellen Tarshis, executive director of Community Living Victoria.

The agencies allege that the trust set its premiums so low that it failed to collect enough money to cover an increase in long-term disability claims. The trust, in turn, says the agencies failed to prevent large numbers of workers from filing claims. As a result, the trust shows more money going out than it has coming in, which is known in the business as an unfunded liability.

The agencies say the government pays the bills and benefited from the low premiums, so it should cover any shortfalls.

"Government has been saving a great deal of money," Tarshis said. "That's why we're facing this problem."

Her agency wants out of the trust, but would face an exit levy of $405,000 that could hurt services to vulnerable adults, she said.

The Semiahmoo House Society left several years ago and refuses to pay a levy of about $327,000, executive director Paul Wheeler said.

"[Government] forced us into a plan that was really badly run, then they insisted that the costs be kept artificially low," he said.

"Then they come along and say, 'That's your unfunded liability.' Well, why is it ours? If you insisted on us being in the plan, you should have at least fully funded us to be in the plan."

The government disagrees and sent letters to the agencies last week reminding them of their responsibility for a share of the deficit. "Service providers were aware when they entered the trust that they would be responsible for paying their part of any existing deficit if they left the trust," Minister of Social Development Moira Stilwell said in a statement.

Jan Grude, the trust's chief executive officer, said agencies will face legal action if they refuse to pay.

"It isn't fair to be leaving disabled employees behind for somebody else to pay for, and swanning about looking for better rates, while not recognizing your financial obligations."

The trust provides benefits on behalf of 186 agencies. Of 53 that have left since 2008, only seven agreed to pay the levies. The other 46 owe $4.8 million.

The government says agencies can avoid litigation by paying the levies over 10 years, noting the cost will be less than $15,000 a year for many agencies and less than $30,000 for most.

The agencies reject that solution.

"It doesn't matter whether you demand payment all at once or amortize it over 10 years: It's not my debt," said Karl Egner, whose company, Kardel Consulting Services in Victoria, remains part of the trust.

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