Cost of living adjustment based on the L&I claim
In short, L&I benefits will grow by just over 6% this year. This is a historically high increase. Last year, the change in the cost of living of 5.5 percent was also historically high. COLAs are based on the average annual salary of all Washington State employees. In order for the increase to be more than 6%, the average annual wages of employees must also increase by the same amount. For work accident applicants, this news could not come at a better time. To view more information about the COLA this year, see the 2020-2021 Schedule of Benefits.
However, we also need to think ahead, taking into account our current reality. The COVID-19 pandemic has severely affected businesses, workers and employees. As a result, the unemployment rate is very high. And many companies have had to close down. Some of the closures are temporary. However, many are permanent. This is especially true in certain industries such as hospitality and retail. Both are industries that used to employ a lot of workers. The coronavirus will have a negative impact on our economy for a long time to come.
What is the L&I accident fund?
The Ministry of Labor and Industry administers the accident fund. Say you have an accident at work. Also, say that you will receive payments and financial benefits based on your workers’ compensation claim. Then it is important to know that the money comes from the accident fund.
In the past, economic recessions had a negative impact on the accident fund’s financial condition. In particular, during the economic booms of the early to mid-2000s, businesses in Washington State experienced an increase in the L&I rate. In other words, employers had to pay higher workers’ compensation insurance premiums to the fund. In 2003, the interest rate increase was an astonishing 28.8%.
Starting in 2007, L&I rates increased for four consecutive years. Unfortunately, these increases were necessary. Companies received significant interest rate reductions, which left the accident fund almost empty. In fact, employers were awarded $200 million in rebates to workers in 1999 and 2000, and $315 million in rebates in 2007. It’s no coincidence that L&I rates had to rise after the employer rebates.
L&I Workers Compensation Insurance Rates in Washington State
The employer’s discounts depleted the accident fund. That’s why L&I raised the workers’ compensation premium to fix it. Business and labor stakeholders at the Workers’ Compensation Advisory Committee (WCAC) decided to do something about it. The WCAC specifically set the goals to ensure that Washington State’s accident fund reserves are sufficient to weather the next recession. Thanks to COVID-19, the next recession is already knocking on our door.
At the moment, the accident fund is in good enough shape to withstand the coming recession. Interestingly, recent projections estimate that Washington state government will face an $8.8 billion revenue shortfall by 2023. Such a deficit requires surgery. Because the accident fund is healthy, the workers’ compensation system is an easy target for tax cuts. Therefore, now more than ever, it is important to focus on and monitor the financial condition of the accident fund.
A workers’ compensation attorney’s perspective
Our (currently) healthy workers’ compensation ecosystem provides a critical safety net for working families. This safety net prevents financial ruin in the event of a disaster. This is why we must actively oppose the depletion of the accident fund that we saw in 1999, 2000 and 2007.
As a society, we cannot afford to drain this employment insurance fund and hope to bail it out later with interest rate hikes. To learn more about this issue, read this recent article. It was written by The Stand, a Washington state employee publication.
This article was first published at https://tarareck.com/l-and-I-cost-of-living-adjustment/