Citizen Portal
Sign In

Lifetime Citizen Portal Access — AI Briefings, Alerts & Unlimited Follows

Get Lifetime Access

Committee considers technical fix to PFML premium split after IRS guidance

Labor and Workplace Standards Committee · January 14, 2026

Loading...

AI-Generated Content: All content on this page was generated by AI to highlight key points from the meeting. For complete details and context, we recommend watching the full video. so we can fix them.

Summary

A proposed substitute for HB 2345 would reallocate employer/employee shares of the Paid Family and Medical Leave premium to avoid federal employment taxation on benefits previously treated as wages under new IRS guidance; supporters say the change prevents an estimated $30 million federal tax hit.

Committee staff and multiple witnesses briefed members on a proposed substitute to HB 2345 on Jan. 14 that adjusts how the Paid Family and Medical Leave (PFML) premium is split between employer and employee to respond to recent IRS guidance.

Staff explained a two‑layer statutory formula that (1) divides the total premium into a family leave share and a medical leave share and (2) assigns employer and employee percentage obligations for each share. Under current law the medical share is partially employer‑paid and is treated under IRS guidance as wages subject to federal employment taxes; benefits attributable to employer contributions for family leave would not be treated as wages. The substitute swaps which share employers pay part of — having employers pay part of the family share (60% employers / 40% employees for the family share) and employees pay the medical share — so that benefits would no longer be treated as wages for federal employment taxes.

Supporters from the Economic Opportunity Institute, the Washington State Labor Council and Employment Security Department said the change is a technical fix designed to avoid unintended federal taxation without materially changing premiums for employers or employees. Sam Hatzenbuehler (Economic Opportunity Institute) called the bill a common‑sense fix; Joe Kendo (Washington State Labor Council) said the substitute prevents sending an estimated $30 million to the federal government and keeps program dollars in the state.

Business and school officials asked for clarity on the impact and sustainability of PFML. Barbara Posthumus (CFO, Lake Washington School District) said school districts already face unfunded program costs (she cited approximately $36 million statewide) and requested an evaluation of program effects and sustainability. Industry witnesses offered technical drafting suggestions and asked for certainty that employer costs will not rise.