Josh Hinman (786-7281)
General. The Paid Family and Medical Leave program (PFML) provides partial wage replacement to employees on leave for specified family and medical reasons. The program is funded through premiums paid by employers and employees. The program is administered by the Employment Security Department (ESD).
Premium Rate Calculation. The total premium rate is calculated in three steps:
If the calculated rate exceeds a rate necessary to maintain a three-month reserve at the end of the following rate collection year, the rate must be set at the minimum rate necessary to close the rate collection year with a three-month reserve. In addition, the rate must not exceed 1.2 percent. In the 2023 operating budget, $200 million was appropriated into the account. This reduced the 2024 rate.
Premiums. Premiums are assessed quarterly and remitted to ESD in conjunction with employer reporting in the month following the end of each quarter. The 2026 total PFML premium rate is 1.13 percent. Premiums are split between family leave and medical leave based on the percentage of paid claims for each type of claim. For 2026, the family premium is 48.06 percent and the medical premium is 51.94 percent of the total premium. Employers may withhold from employees up to 100 percent of the family leave premium and up to 45 percent of the medical leave premium. For 2026, this would allocate 71.43 percent of the premiums to employees and 28.57 percent of the premium to employers. Small employers—employers with 49 or fewer employees—are generally exempt from paying the employer portion of the premium.
Premiums are paid on wages up to the maximum wages subject to tax for social security (social security cap). For 2026, the social security cap is $184,500.
Eligibility and Benefits. Employees are eligible for benefits under PFML after working at least 820 hours in a qualifying period. A qualifying period is the first four of the last five full calendar quarters, or the last four full calendar quarters. The program generally allows for up to 12 weeks of paid family leave or paid medical leave for eligible workers. Under certain circumstances, up to 16 or 18 weeks of combined leave is allowed. Benefits are paid after a seven-day waiting period.
Benefits depend on the amount of the employee's average weekly wage and may provide up to 90 percent of the employee's weekly pay for each week of leave. The 2026 maximum weekly PFML benefit is $1,647 and the minimum is $100.
Office of Actuarial Services Report. In 2022, the Legislature created the Office of Actuarial Services (Office) within ESD. The Office is required to report annually to the PFML advisory committee on the experience and financial condition of the account, and the lowest future premium rates necessary to maintain solvency of the account in the next four years while limiting fluctuation in the premium rates. The 2025 report provides:
Beginning January 1, 2026, the Office must submit a report to the PFML Advisory committee and the Legislature if the Office projects a deficit in the PFML insurance account will not be recovered through the next quarterly premium collections.
Joint Legislative Audit and Review Committee Report. In 2022, the Legislature required the Joint Legislative Audit and Review Committee (JLARC), in consultation with ESD, to conduct a performance audit analyzing the implementation of the PFML program. For PFML rates, the JLARC report recommends the program:
The report provided the following additional comments. A forward-looking rate-setting approach can reduce volatility and incorporate long-term financial projections. Seven of nine state PFML programs reviewed by JLARC staff use forward-looking approaches. A reserve target or floor allows rates to move up or down to maintain a targeted balance. Washington is the only state to use a reserve cap for its PFML program reserve.
The ESD Commissioner must set the PFML premium rate based on the Office of Actuarial Services annual report. The total premium rate must still not exceed 1.2 percent. The Office of Actuarial Services report must provide for a rate to close the rate collection year with a four-month reserve in 2030, in addition to the current requirement to maintain a four-year solvency. The statutory formula used to calculate the rate is eliminated.
The committee recommended a different version of the bill than what was heard. PRO: Business, labor, Republicans, and Democrats came together to create the state's family and medical leave program. The parties settled on a method for setting rates that did not meet the needs of the program, and in 2023 came together again to set a new rate formula. The rates have been somewhat volatile.
The JLARC report and ESD recommend that the program adopt actuarial rate setting to ensure that the revenue meets the needs of the program. This bill simply implements the JLARC recommendations. By deferring to financial experts in setting rates, we hope to ensure the predictability of these premiums and the solvency of this important program. This will benefit the workers and employers alike.
CON: The bill removes the 1.2 percent cap. When the program was designed, the rate was 0.4 percent. Tripling the original rate is a good place to set that cap. Moving beyond that 1.2 percent cap should come back to the Legislature and there should be some problem solving. JLARC staff is more qualified to talk about the rate setting process.
The rates have been volatile from 2024 to 2025. The rate went from 0.74 to 0.92 percent. This is nearly an 8 percent increase in premiums that employers are paying just from one year to the next. The goals of predictable and fiscally sound rates for the program are good.
The other challenge is the requirement to have a three-month reserve. While this is fiscally prudent, this will put additional stress on those rates to go up quickly. The 1.2 percent cap should remain; or alternatively, have some language that a smaller amount of a rate increase could be done administratively, but a larger increase should have to come back to the Legislature.
There are concerns about the future of this program. As potential new benefits are added to the program, costs could increase quickly if the cap is removed.
OTHER: There are big concerns about the removal of the cap. Since the program started in 2019, the rate has increased by 130 percent, far exceeding the rate of inflation. Workers and employers cannot afford to keep moving forward if the rate setting is changed to actual year setting. Consider stabilizing the program and not trying to change the programs because that will further destabilize the financial stability.
Instead of the current mechanism of using a formula that relies on data from the previous year to set the rate for the following year, JLARC's recommendation to the Legislature was to use a forward looking or actuarial rate setting process that tries to incorporate the most current information to set the rate. That is the best fit for what is expected to happen in the next year. JLARC did not make a recommendation around the cap. JLARC's understanding is that having a cap is compatible with an actuarial rate, though there is the chance that the actual rate that the actuaries come up with could exceed that, but JLARC did not address that in the recommendation or report.
The Legislature should end the state's paid leave program as it cannot pay its way. Instead, this bill considers a way to tax workers, and even to work for a benefit that many will never see instead of putting more of their wages into their current life needs. The tax is $0.92 on every $100 a worker earns. That's more than twice the amount when the tax began in 2019. JLARC says that administrative cost and benefits for the program exceeded revenue in two of its first four years. A state consultant says the program is likely to see negative net income again in three of the next five years.
Worse than not paying its way, the program requires low-income wage earners to supplement the life needs and wants of upper wage earners. Research shows that middle and upper income people use paid leave more than those with lower incomes. People making $60 or more an hour use the fund nearly twice as much as the lowest wage earners in the fiscal year 2024. This paid leave program is no public safety net. Full-time workers of all income levels lose hundreds of dollars to this tax each year.
While some supporters say that thousands have been helped, they failed to mention that millions of workers have not. For some of those workers, making ends meet is far more difficult because of it. Don't decrease take home pay again next year. Federal law already offers workers 12 weeks of job protected unpaid family leave. It doesn't pay people not to work while taxing those who do work.
PRO: PFML has benefited many workers. A retrospective rate does not fit the needs of the program. Forward-looking rate is suggested by the JLARC report. We should defer to financial experts.
OTHER: Workers would be better off if we ended PFML. This program is not a safety net program, and the benefits flow to the highest wage earners. Costs have exceeded revenue and the negative revenue is expected in future years. I am glad the 1.2 percent rate cap was reinstated into the bill. The fiscal note says the three-month reserve will never be achieved. In 2024, families making more money used the program the most. Full-time workers lost hundreds of dollars per year by this tax. Some are helped, while millions are not helped.
The committee recommended a different version of the bill than what was heard. PRO: The bill is implementing the JLARC review. We are trying to stabilize the funding in this program given the unpredictability of the fund. This would be the same model as is used in our pension plans. We don't base our pensions on what the experience has been in the past. We look ahead and try to predict where we are going to go with our funding.
This bill will move the rate setting mechanism to a forward-looking actuarial model and as you heard is directly from the 2024 JLARC audit. The employee interest side of the advisory committee is in strong support of this transition. When paid leave was first negotiated back in 2017, how rates were to be set was tightly negotiated. This was a brand-new program and there was great interest in having a very tight definition of the rate calculation. Allowing ESD to look at a variety of forward-looking factors like demographic changes, economic trends, uptake, and changes in user behavior will inform the total picture for rates. This is the best next step for the program's overall health and stability.
A forward-looking model provides more reasonable insights into the program and modeling. This bill left the Senate floor last year near unanimously. It ran into some challenges in the House when some amendments were added. Keep it moving forward “as is.”
The substitute does not change the fundamentals of last year’s agreement. A forward-looking rate setting calculation is a smarter, more stable way of looking at this program.
CON: Affordability is a big issue for us, especially after this last historical raise in taxes, the Legislature forced upon taxpayers. Now we're looking at even more taxes in order to make up a probably greater than $2 billion deficit. This bill does not address any affordability. While there is a cap, it still means raising rates and most likely raising rate yet again, pass that cap eventually. The people have spoken, but will you listen?
OTHER: Last session, the House amended the bill to add an incremental increase to the rate cap until it reached 2%. When the payroll tax began in 2019, the rate was 0.4%. The tax and the payouts have seen considerable increases in this program's short lifetime. It is unsustainable and harmful to the majority of Washington workers forced to pay in.
There is concern that the bill will again become a vehicle for the rate cap. This will allow this payroll tax to take even more wages from workers, including low-income ones whose wages should be available for their own life needs. Often low income workers' earnings are given over to people with higher incomes. PFML is progressive in rhetoric, but regressive in reality.
In 2025, people making $61 or more an hour used, the program more than twice as much as the lowest wage workers, with many of them having more of than one claim. Usage among the bottom wage quintile was just 8 percent of all claims in 2025.
PFML is not a safety net. It is often misused because of loose qualifications for benefits. Reconsider this program that mandates pay leave for some workers at other workers' expense, especially when it's proven to be a state-mandated benefit for middle and upper wage earners. It makes sense to make adjustments to the overly generous benefits before increasing the tax rate even higher.
The JLARC report recommended using an actuarial rate or a forward -looking rate so that we're taking the best information available to make sure that the rate for the upcoming year is in line with expectations rather than basing the rate on the previous experience. Also the rate should captures a reserve as a buffer in case circumstances change or those forecasts are not as accurate as, one might like. JLARC did not get into capping the rate. It has been a while since the report and some circumstances have changed.