The Washington Paid Family and Medical Leave (PFML) Program, which is administered by the Employment Security Department (ESD), provides partial wage replacement benefits to employees on leave for specified family and medical reasons. An eligible employee may access PFML benefits for a qualifying event if the employee worked at least 820 hours during a qualifying year. The 820 hours can be satisfied in one or more positions with one or more employers. An eligible employee can access up to 12 weeks of medical leave or family leave benefits, or up to 16 to 18 weeks of combined medical and family leave benefits in a year. An eligible employee may receive benefits up to 90 percent of their wages, subject to a weekly maximum, which is $1,542 in 2025.
Premium.
The PFML Program is funded through premiums paid by employers and employees. Employers collect the premium and remit the funds to the ESD on a quarterly basis, which are then deposited into the Family and Medical Leave Insurance Account (Account).
The premium is imposed upon each employee's taxable wages up to the Social Security maximum taxable earnings cap, which is $176,100 in 2025. The total premium rate has two components: a family leave share and a medical leave share. The split between the shares is based on the percentage of paid claims in each category in the previous year. For the medical leave share, employers with 50 or more employees pay 55 percent, and employees pay 45 percent. Employers with fewer than 50 employees are exempt from paying premiums. For the family leave share, employees pay 100 percent unless the employer chooses to pay a portion.
The total premium rate for combined family leave and medical leave benefits is established through a statutory formula and adjusted annually by the ESD. On or around October 20 of each year, the ESD must calculate the total premium rate for the following year, as follows:
The total premium rate is capped at 1.2 percent. The total premium rate must be adjusted when the ESD determines the calculation based on the formula exceeds a rate necessary to maintain a three-month reserve. "Three-month reserve" means the average monthly expenses, including the total amount of benefits paid and the ESD's administrative costs, in the prior 12 calendar months from the date of the calculation, multiplied by three.
The total premium for 2025 is 0.92 percent of taxable wages, of which 71.52 percent is allocated to employees and 28.48 percent is allocated to employers, except employers with fewer than 50 employees are not required to pay the premium.
Office of Actuarial Services Report.
The Office of Actuarial Services within the ESD annually reports to the PFML Advisory Committee on the experience and financial condition of the Account, including the lowest future premium rates necessary to maintain solvency in the next four years while limiting fluctuation in premium rates. These reports must also be sent to the Legislature through 2028. In 2024 the Office of Actuarial Services reported that overall claims in the program have been higher than projected, and there will be material increases to the premium rate until it reaches the 1.2 percent cap in 2027. The Office of Actuarial Services recommended exploring shifting from the statutory premium formula to an actuarial rate setting approach.
Joint Legislative Audit and Review Committee Report.
The Legislature directed the Joint Legislative Audit and Review Committee (JLARC) to evaluate certain elements in the PFML Program, including the program administration, accounting practices, and financial stability. In a final report published in January of this year, JLARC made several findings, including that the statutory premium rate formula does not produce enough revenue to cover program expenses, and that the program will have a negative balance for portions of 2025 and 2026. The consulting actuary with JLARC recommended using a forward-looking rate-setting approach and maintaining a financial reserve sufficient to cover shortfalls.
The statutory formula for setting the total PFML premium rate is removed. Instead, the ESD must annually set the total premium rate based on the annual report provided by the Office of Actuarial Services. The report must include the lowest premium rates necessary to:
"Four-month reserve" means the average monthly expenses, including the total amount of benefits paid and the ESD's administrative costs, using actuarial projection for the following calendar year, multiplied by four.
The cap on the total premium rate is increased as follows:
Date Range: | Maximum total premium rate: |
Beginning January 1, 2027, through December 31, 2028 | 1.4 percent |
Beginning January 1, 2029, through December 31, 2030 | 1.6 percent |
Beginning January 1, 2031, through December 31, 2032 | 1.8 percent |
Beginning January 1, 2033, and ongoing | 2 percent |
The amended bill makes incremental increases to the cap on the total premium rate every two years, from January 1, 2027, to January 1, 2033, until it reaches 2 percent (rather than maintaining the 1.2 percent cap as provided in the underlying bill). The amended bill also requires the premium rate to be at the lowest rate necessary to establish a four-month reserve (rather than a three-month reserve) by the end of 2030 and each year thereafter.
(In support) The current statutory formula for establishing PFML premium rates, which was adopted following a legislative task force in 2022, has produced unstable rates and other issues. The JLARC and the ESD both recommend having the Office of Actuarial Services set the rate using actuarial practices, similar to what the state does for other programs, like workers' compensation. It is important to implement an actuarial-based model in order to stabilize rates and eliminate short-term deficits. However, there will continue to be issues if other adjustments are not made. The state could evaluate adjusting the 1.2 percent cap on the total premium rate, the social security wage cap, and the exemption for small businesses. These three policies constrain the program and create solvency issues.
(Opposed) None.
(Other) Even with adopting an actuarial model, current analysis by the ESD indicates that the 1.2 percent rate cap will keep the program from maintaining solvency in the long term. The PFML Program has significant solvency issues. The PFML Program primarily benefits high wage workers while placing significant tax burdens on low wage workers and employers. The state should repeal the program.
(In support) Senator Steve Conway, prime sponsor; and Joe Kendo, Washington State Labor Council, AFL-CIO.
No new changes were recommended.
(In support) This bill implements a Joint Legislative Audit and Review Committee (JLARC) recommendation that our state's program moves to an actuarial rate setting model away from a statutory model, which ensures long-term stability. The phase-in increase of the rate cap aligns with the increase usage of the Paid Family and Medical Leave (PFML) program. The Washington program has been successful. For small businesses under 50 employees, the employers do not pay into the program, only the employees. The goal is to have a solvent fund which is there for when workers need it.
(Opposed) Paid Family Medical Leave is one of the most popular programs for worker assistance. This bill takes a program that currently works and breaks the system. Workers pay 70 percent of this rate and the increase, once phased-in, is substantial for low wage workers. The PFML Program primarily benefits high wage workers while placing significant tax burdens on low wage workers and employers. This program is not expected to be solvent. Affordability of the program is important to workers and businesses.
The Legislature should wait on this policy and receive more data before moving forward with a change. Do not adopt the policy committee amendment, move to the version of this bill passed out of the Senate, and maintain the 1.2 percent rate cap. With the 2 percent rate cap, the impact to workers and businesses is too steep. This bill that was designed to create more solvency and reduce fluctuations in the programmatic account has turned into a bill that businesses fear. Washington would have the highest tax rate in the country. Now is not the time to move this bill.
(In support) Maggie Humphreys, MomsRising; and Sam Grad.