Committee hears bill to shift PFML premium-setting to actuarial approach, retain 1.2% cap

The Labor & Workplace Standards Committee on March 18 heard substitute Senate Bill 52-92, which would remove the program's current statutory premium formula and require the Employment Security Department to set the state's paid family and medical leave (PFML) premium annually based on an actuarial report.

Kelly Leonard, staff to the committee, told lawmakers that PFML is administered by the Employment Security Department and is funded by premiums remitted by employers and employees. Leonard said the premium is imposed on each employee's taxable wages up to the Social Security maximum taxable earnings cap, which staff said is $176,000 for 2025, and that the department currently sets a total premium rate using a statutory formula that considers prior-year expenses, taxable wages and the account balance.

The bill would remove that statutory formula and instead require the department to set an annual premium rate based on a report from its office of actuarial services. The report must include the lowest premium rates necessary to maintain solvency over four years while limiting rate volatility, and by the end of the 2030 rate collection year must show a three-month reserve; the bill retains the 1.2% total premium cap.

State Senator Steve Conway, the bill's prime sponsor, described the measure as an effort to implement recommendations from the Joint Legislative Audit and Review Committee (JLARC) and to stabilize rates. "This is kind of a basic funding plan," Senator Conway said, adding that the change would align PFML rate-setting with actuarial approaches used for pensions and unemployment insurance.

Leonard recited the program's current allocation and the department's fiscal projection: she said the total premium for 2025 is 0.92% of taxable wages, with roughly 71.5% allocated to employees and 28.5% to employers, and that the department's fiscal note projects an actuarial approach combined with the cap would result in the rate being set at the cap (1.2%) for the first year the new approach is used and staying near the cap through the near term.

Labor representatives told the committee they support use of actuarial rate-setting. Joe Kendo of the Washington State Labor Council said statutory formulas have not matched program demand and that actuarial setting would let experts acknowledge the program's fiscal reality.

Elizabeth New of the Washington Policy Center urged caution, saying the program still would not reach the three-month reserve under some scenarios and that higher employee payroll deductions have widened take-home pay concerns. Josh Dye, interim government relations director for the Employment Security Department, told lawmakers the department's actuarial modeling indicates the 1.2% cap is unlikely to maintain long-term solvency and said he would provide additional numerical detail to the committee on request.

Why it matters: PFML is a widely used wage-replacement program that affects nearly every private-sector wage earner and many employers in Washington. The bill would change how the program's funding rate is set and would impose an explicit reserve objective, with possible material effects on employee payroll deductions and employer payments.

Committee next steps: Committee staff and the Employment Security Department said they would provide additional modeling and numbers to members for follow-up analysis; the hearing was suspended pending further consideration.