Analysis of workers’ compensation rate increase’s impact on retailers and workers
By Rose Gundersen, VP of Operations and Retail Services
Labor & Industries (L&I) announced a 3.1% average workers’ compensation rate increase this week for 2022. According to the Washington Research Council’s analysis, though the average workers’ compensation rates have dropped over the last three years, this proposal is the highest average rate increase since 2011.
The average rate increase for retail members whose risk classes fall within the two retrospective rating groups WR administers is 3.7%, with a range rate adjustments from -3% to +9%. However, the average rate increase for employees is 6.7% and only 2.5% for employers based on the 10.1% cost-of-living adjustment for the Supplemental Pension Fund.
In Washington State, this adjustment to the workers’ compensation pension is pegged to the state’s average annual wage increase. But due to the high rate of pandemic-related layoffs and furloughs of lower-wage jobs in 2020, the average annual wage goes up because those who remain working are higher-wage jobs. The average annual wage increase, as a result, does not reflect what is happening in the labor market.
At the June 2020 WAC Advisory Committee meeting, L&I’s Senior Actuary, Bill Vasek, shared his concern, anticipating the high adjustment rate for the Supplemental Pension Fund (SPF). Based on his analysis, a 6% or higher average wage increase would result in a double-digit escalation to total Supplemental Pension Fund payments because the premiums for the SPF are shared equally between employers and employees. This resulted in an increase of the workers’ payroll deduction at a higher rate than the employers’, according to a detailed review of the 2022 rate proposal.
This disproportionate rate increase for workers may have been avoidable had the Legislature passed SB 5137, proposed in the 2021 session. Senator King drafted this bill in response to the L&I actuary’s concern for a rate increase, but it died in the Senate Rules Committee. Since wage increase is not slowing down due to labor shortages, Washington Retail will continue working with the labor and business community to mitigate future workers’ compensation rate increases which disproportionately affect workers.