L&I Cost of Living Adjustment (COLA) and the Washington State Accident Fund
Cost of living adjustment on an L&I claim
In short, L&I benefits will increase by just over 6% this year. This is a historically high increase. Last year’s cost of living change of 5.5% was also historically high. COLAs are based on the average annual salary of all Washington State workers. In order for the increase to be above 6%, the average annual salaries of employees must also increase by the same amount. For workers’ compensation claimants, this news could not come at a better time. If you would like to review more information about this year’s COLA, please see the 2020-2021 Benefits Schedule.
However, we must also think ahead, taking into account the current reality. Businesses, workers and employees have been severely affected by the COVID-19 pandemic. Consequently, unemployment rates are very high. And many businesses were forced to close. Some of these closures are temporary. However, many of them 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 Corona virus will have a negative impact on our economy for a long time.
What is an L&I accident fund?
The Ministry of Labor and Industry administers the Accident Fund. Say you had an injury at work. Also, say that you are receiving payments and financial benefits from your workers’ compensation claim. Next, it is important to know that the money comes from the Accident Fund.
Previously, economic downturns had a negative impact on the accident fund’s financial position. Specifically, during the economic booms of the early and mid-2000s, Washington state businesses experienced an increase in L&I. In other words, employers had to pay higher workers’ compensation insurance rates to the fund. In 2003, the percentage increase was an astonishing 28.8%.
Beginning in 2007, we saw four consecutive years of L&I rate increases. Unfortunately, these rate hikes were necessary. Businesses received significant interest rate discounts that left the accident fund almost empty. In fact, there were $200 million in workers’ compensation rebates for employers in 1999 and 2000, and $315 million in rebates in 2007. It’s no coincidence that L&I rates had to increase after these rebates for employers.
L&I Washington State Workplace Accident Insurance Rates
Employer discounts have drained the Accident Fund. Therefore, L&I introduced an increase in workers’ compensation insurance rate to fix it. Business and labor stakeholders at the Workers’ Compensation Advisory Committee (WCAC) decided to do something about it. The WCAC specifically established goals to ensure that reserves in the Washington State Accident Fund would be sufficient to weather the next recession. Thanks to COVID-19, the next recession is already knocking on our door.
Currently, the Accident Fund is strong enough to weather the coming recession. Interestingly, recent projections estimate that Washington state government faces an $8.8 billion revenue shortfall by 2023. That kind of shortfall will require cuts. With the accident fund healthy, the workers’ compensation system will be an easy target for tax cuts. That is why now more than ever it is important to focus and monitor the financial health of the Accident Fund.
The workers’ compensation attorney’s point of view
Our (currently) robust workers’ compensation ecosystem provides a critical safety net for working families. This safety net prevents financial ruin when disaster strikes. For this reason, we must actively oppose the kinds of depletion of the Accident Fund that we saw in 1999, 2000 and 2007.
As a society, we cannot afford to empty this workers compensation insurance fund and hope to save it by raising rates later. For more information on this issue, please read this recent article. It was written by The Stand, which is a Washington state labor publication.
This article was first published on https://tarareck.com/l-and-I-cost-of-living-adjustment/
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