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ACC levies too high, not transparent

4 November 2005

ACC levies too high, not transparent

Business NZ says ACC levy setting is not transparent and businesses are being overcharged.

ACC proposals for 2006 include keeping the employers levy at $1.21 per $100 of payroll, to maintain a prudential reserve and achieve 'future levy stability'. But Business NZ Chief Executive Phil O'Reilly says the reserve, now over $400 million, is higher than needed to smooth premiums over time.

"That $400 million is employers' money. ACC should give it back.

"Premiums are being smoothed so much they no longer provide price signals. The whole reason for the fully funded model is so premiums reflect the cost of accidents, creating incentives for safer workplaces. But unnecessarily large reserves and cross subsidies for 'future levy stability' mean premiums don't reflect actual costs, and the process isn't transparent.

"The lack of transparency is unfortunate, since the employers and self-employed accounts may in future be merged. The grossly over-funded employers account could become a cash cow for an underfunded self-employed account, damaging the incentives for safe workplaces in both accounts.

"Another possibility is that the Government could decide to extend the scope of the ACC scheme and use the employers reserves to do so, without it being transparent," Mr O'Reilly said.

Business NZ's submission on proposed levies for 2006/7 recommends returning excess reserves funds to employers, reducing the prudential margin, and auditing and making public the rationales behind the levy setting process.


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