PFML Premiums Task Force recommends proposal to fix program solvency issues

Readers will remember that last session the Legislature created a Legislative Task Force on Paid Family & Medical Leave Insurance Premiums to look into cash flow and program solvency issues that have been hitting the PFML program for the past year and recommend ways to tweak the program to avoid those issues. The Task Force has met throughout the fall to discuss various proposals. On November 30, they decided on a recommendation that they will present to the Legislature in January.

The recommendation adopted by the Task Force would make several changes to the PFML program. The recommendation adopted the following outline:

• Use whatever remains of the $350 million already allocated by the legislature as an emergency reserve to help shore up the current deficit and provide for the beginnings of a reserve fund.
• Raise the premium rate cap to 1.2% and eliminate the solvency rate surcharge provision in statute.
• Rework the premium calculation formula to include a high enough rate to create a roughly three-month reserve. The formula would use historical program usage to estimate demand for benefits. The new formula would:
  • Begin with 140% of the previous fiscal year’s expenses minus the account balance, then divide by the previous fiscal year’s taxable wages.
  • Calculate the result to four decimal places, then round up to set the rate at two decimal places (ex. 0.7489% becomes 0.75%) to set the rate.
  • If the calculated rate results in a projected annual account balance higher than necessary to meet projected program expenses plus maintain a three-month reserve, then then lower the rate to minimum necessary to meet projected expenses and maintain the reserve.
  • A three-month reserve is defined as the average monthly expenditures in the previous 12 months, multiplied by 3.

Task Force members said that the plan will stabilize solvency issues, provide for a three-month reserve, and keep premiums as low as possible while still maintaining solvency for the popular PFML program. The Task Force presented its recommendations to the Senate Ways & Means Committee during legislative committee days on December 1. Formal bill language and a final report still need to be drafted and will be submitted to the Legislature soon.