Paid Family & Medical Leave (PFML) premium rate setting is once again getting legislative attention. A proposal to once again change how PFML premiums are calculated is scheduled for a hearing this week. The bill is in response to a long-running solvency problem that has left the PFML program in a deficit that is expected to worsen in the next few years.

SB 5292 is sponsored by Sen. Steve Conway (D–Tacoma). The bill repeals the current statutory method that ESD is required to use to calculate PFML premiums each year. Instead of a statutory formula, the bill directs ESD to set its total premium rates based on the annual reports to the legislature of the ESD Office of Actuarial Services – an office that was created in 2022 in part to help the agency respond to the PFML deficit.

The bill also requires that the premium rates calculated by the Office of Actuarial Services to be the lowest future rate necessary to: 1) maintain solvency of the PFML program in the next four years while limiting rate volatility, and 2) close the rate collection year with a three-month reserve.

In 2022, ESD announced that it was facing a reoccurring solvency problem with funding the PFML program, as premium rates were statutorily set and not high enough to meet the rapidly growing demand for program benefits. The legislature responded by changing how rates are calculated in 2023, but those rates are still required to be based on prior experience, not forward-looking costs, all the while benefits claims continue to outpace each previous quarter’s collected premiums. 2024 reports from the Office of Actuarial Services and from JLARC both conclude that PFML rates should be set using a forward-looking actuarial rate setting approach, similar to other states’ rate setting schemes for their paid leave programs.

Dates to remember

SB 5292 is scheduled for a hearing in the Senate Labor & Commerce Committee on January 21 at 10:30 am.