Given the financial issues with the paid family and medical leave (PFML) program, the Legislature passed a bill earlier this year (2SSB 5649) that established a legislative task force on paid family and medical leave insurance premiums. The task force is charged with making recommendations for any changes to PFML premiums, “to ensure the lowest future premium rates necessary to maintain solvency of the family and medical leave insurance account . . . in the next four years while limiting fluctuation in family and medical leave insurance premium rates.” A final report from the task force is due by Dec. 30, 2022.

The task force held its first meeting yesterday (video is available here). The Employment Security Department (ESD) presented a good overview of the program and its financial situation. Some notes:

• The program is still in the initial period of growth. Benefits have not yet started leveling off, which would be an indication of program maturity.
• As I wrote yesterday, premiums increased substantially in the second quarter of 2022 and exceeded benefits paid for the first time since the second quarter of 2020. However, ESD doesn’t expect premiums to continue to exceed benefits for the rest of the year because typically premium collections are highest in the second quarter of a year.
• Although the account balance went negative this month, ESD expects the account to have a positive balance again early next week.

Additionally, ESD laid out some of the issues they’ve noticed with the current premium structure:

On the reserve point, ESD said a reserve could be a separate account or even just an adjustment to the rate calculation that would automatically create a buffer, to help avoid the cash flow problems.

ESD concludes that the current premium structure “can’t accommodate large variations, like initial program growth, without deficit periods.”

Meanwhile, 2SSB 5649 also requires the Office of Financial Management (OFM) to contract with an actuary for a report to the Legislature including information on the PFML program’s finances, options to modify premiums to maintain solvency, and a comparison of the program’s premium structure with those in other states with similar programs. This report is due by Oct. 1, 2022. During yesterday’s task force meeting, OFM said that they are still negotiating a contract with an actuarial firm and hope to have it signed next week.

The legislative task force will use OFM’s actuarial report to inform its recommendations.