The Employment Security Department (ESD) announced that a 0.2% solvency surcharge will be added to 2023 Paid Family & Medical
Leave (PFML) premiums to try to combat the persistent cash flow issues that now regularly hit the PFML program each quarter. The solvency surcharge, coupled with the new premium rate calculated on September 30, will result in a total premium rate
of 0.8% starting January 1, 2023.
The solvency surcharge brings the new premium rate largely in line with a recommendation from an actuarial report commissioned
by the state regarding program solvency that was released earlier in October. By comparison, the base rate for 2022 was 0.6%, the current legal maximum that can be charged without a solvency surcharge.
The employer/employee split of the premium will be roughly the same as it was in 2022. Employers will be responsible for 27.24% of the total premium and employees will be responsible for 72.76%. Employers are only required to pay the portion of premiums
that go for medical leave taken by employees, while employees’ premiums fund both medical leave and family leave. Small employers with fewer than 50 employees are not required to pay the employer portion of the premium. In November, ESD will
be doing more outreach to employers and updating resources on its website regarding the new premiums.
The 2023 solvency surcharge is a stopgap measure that’s meant to temporarily ensure more adequate funding for the program in 2023 while the Legislature considers more permanent changes to address program solvency. ESD has pointed to several factors
that contribute to the current solvency issue, including higher than expected use of the program, the COVID-19 pandemic, a low statutory cap on premiums, a legal bar on collecting premiums to maintain a reserve, and the method and timing of the premiums
collection.
The Legislative Task Force on PFML Insurance Premiums is currently looking into these premiums and solvency issues and will begin reviewing policy proposals
on November 22. The meeting will be available on TVW for those interested in watching. The Task Force is expected to bring final recommendations to the Legislature in January.