New funding policy puts ACC on more stable, transparent levy path

ACC Minister Nikki Kaye today confirmed the Government’s new funding policy for ACC, and announced that ACC levies will now be set every two years, rather than annually.

The funding policy is the latest in a number of improvements implemented as part of the Accident Compensation (Financial Responsibility and Transparency) Amendment Act, which came into force in September 2015.

“The new legislation means we now have a more principled, transparent framework for ACC funding decisions, and more stringent reporting requirements to ensure the public is better informed,” says Ms Kaye.

“A key change under this new law is that the government, rather than ACC, now sets the funding policy for ACC’s levied accounts.

“The funding policy will see each of ACC’s levied accounts aim to hold assets within a band of between 100 and 110 per cent of the account’s liabilities over a 10-year horizon.

“In the past, there was an inconsistent approach to levy-setting. This led to big swings in levies, which was hard for New Zealanders and businesses to deal with. The scheme is still subject to short-term economic volatilities, so it’s important we have a funding policy that recognises and can accommodate this.

“The new policy will ensure the scheme is adequately funded to withstand economic volatilities, while ensuring levies are kept as low as possible and stable over time. It will also help remove any perception that levies are being over-collected.

“The new legislation introduced last September also allowed for the removal of residual levies, which collected historical claims costs. This has resulted in fairer work levies from 1 April 2016, based on industries with the greatest injury costs paying their true share of these costs.

“ACC’s levied accounts are now fully funded. This is a significant milestone, as it means ACC holds sufficient funds to meet the lifetime costs of existing claims.

“The new funding policy provides for levies to be kept as low and stable as possible, while still providing reassurance that people’s future injury-related needs and costs will be met.

“To further strengthen levy stability, I took a paper through Cabinet that will see levy-setting and consultation occur every two years, instead of the annual levy rounds currently in place.

“This is about reducing bureaucracy and giving greater stability and certainty around levy rates over time.

“Cabinet has agreed that generally, levy rates will be set for the two-year period, however, there’s flexibility for different rates to be set in each year if necessary.

“Later this year, ACC will begin consulting on 2017/18 and 2018/19 levies, informed by the funding policy confirmed today.

“The 2016/17 year sees significant levy reductions totalling $450 million. Work and earners’ levy cuts took effect last month, and there will be a 33 per cent reduction to the average motor vehicle levy from 1 July 2016.

“ACC’s improved financial position, combined with the significant package of reform I’ve introduced aimed at ensuring greater transparency and stability, mean the scheme is in great heart.”

View Cabinet paper Implementing Biennial ACC Levy Rounds here

View Cabinet minute Implementing Biennial ACC Levy Rounds here