As I wrote yesterday, the paid family and medical leave (PFML) premium will increase from 0.6% to 0.8% next year (including a solvency surcharge). The PFML premium is paid on wages up to the Social Security cap, which is increasing 9.0% next year to $160,200. Additionally, the state’s long-term care (LTC) program is scheduled to begin collecting premiums on July 1, 2023. The LTC rate will be 0.58% of all wages (it is not subject to the Social Security cap).

Altogether, these changes mean that the amount of PFML and LTC payroll taxes paid by employees in Washington will increase significantly—even though the LTC tax will only be in effect for half the year. The table below shows how much employees are paying now and how much they will be paying next year, at certain wage levels: $32,739 (working full time at the minimum wage in 2023), $82,508 (the 2021 state annual average wage), $160,200 (the 2023 Social Security cap), and $200,000.

Some important notes about the table:

• By statute, the PFML premium is split between employees and employers. Employees are responsible for 73.22% of the premium in 2022 and 72.76% of the premium in 2023. However, employers may choose to pay the employee portion themselves. The table assumes that the employee pays the statutory employee portion of the premium.
• The table includes only the half-year impact of the LTC.  

As the table shows, the amount owed for these two taxes in 2023 will be $285.52 for someone making the minimum wage (an increase of $141.69, or 98.5%) and $1,512.54 for someone earning $200,000 (an increase of $866.74, or 134.2%). (If the LTC tax were in place for the full year, the combined 2023 taxes due would be $380.47 for someone making the minimum wage and $2,092.54 for someone earning $200,000.)

People making the state average wage are paying 0.44% of their wages in these payroll taxes this year; they will pay 0.87% of their wages next year. (If the LTC tax were in place for the full year, they would pay 1.2% of their wages.)

Note that the future of these rates is highly uncertain. In 2022 the Legislature created a new legislative task force on PFML insurance premiums, which will be making recommendations on changes to the PFML premium rate structure. The recommendations are due by Dec. 30, 2022, and the Legislature could make changes next year. Earlier this month, an actuary told the task force that the current statutory maximum base rate (0.6%) is “too low” for the program. (For background on the PFML program and its financial troubles this year, see our policy brief.)

Meanwhile, the LTC payroll tax was initially supposed to be assessed beginning Jan. 1, 2022, at the 0.58% rate. But a 2020 actuarial report from Milliman had estimated that, at that rate, the program’s trust would be depleted by 2076. The report estimated that a rate of 0.66% would keep the program solvent over the standard 75-year window. (Our 2021 overview of the program is here.) Then, earlier this year, the Legislature acted to delay the program by 18 months, and it made some other changes. The Office of the State Actuary expects to have an updated actuarial report on the program incorporating all the new information this fall.