Washington’s paid family leave program running short on cash

A new analysis of the financial health of Washington state’s paid family leave program estimates the fund will hit an $8.7 million deficit by the end of the year, leading to recommendations of another increase in the premiums on workers’ wages.

The actuarial analysis by the consulting firm Milliman was presented to a legislative task force Friday morning, and it shows that the current premium rate is not keeping up with demand for the state benefit that launched in 2020.

The report recommends raising the rate to 0.79% of workers’ wages, up from the 0.6% rate that went into effect earlier this year. When premiums first were enacted, 0.4% of workers’ wages funded the program, with 63% paid by employees and 37% paid by employers. But in addition to the rate increase that took effect this past January, employees’ share increased to 73%, with the remainder paid by employers.

The report recommends the higher rate for the next two years, followed by a slight reduction to 0.735% from 2025 through 2027, which “is expected to return the program to a surplus position and maintain fund balances close to target levels in future years.”

The Employment Security Department, which said its projections are slightly different than the actuary report, has estimated that a 0.9% premium rate is necessary. Officials there say they are still in the process of calculating the latest data and will announce the new rate in the coming weeks.

Under the law, eligible workers receive 12 weeks paid time off for the birth or adoption of a child or for a serious medical condition of the worker or the worker’s family member, or 16 weeks for a combination of both. An additional two weeks may be used if there is a serious health condition with a pregnancy. Family members in the military also qualify for leave to spend time with service members about to be deployed overseas or who return home from deployment.

Weekly benefits are calculated based on a percentage of the employee’s wages and the state’s weekly average wage — which is now $1,586. Though the weekly amount paid out is currently capped at $1,327, tthat is set to increase in January to $1,427.

Concerns about long-term solvency for the program emerged earlier this year, with a warning in January that the program would hit a deficit by March. Lawmakers set aside $350 million in the state supplemental budget that passed earlier this year to address any deficit that exists on June 30, 2023, the end of the fiscal biennium.

The fund’s balance – which had started at more than $467 million in early 2020 – dipped to just $19 million by the end of March. At the end of June, it increased slightly to just over $31 million by the end of June, according to the actuary report.