Paid Family and Medical Leave Program
25-01 final report | January 2025
Zack Freeman, Aline Meysonnat, Josh Karas, research analysts
Ryan McCord, audit director; Eric Thomas, legislative auditor
Legislative Auditor's conclusion
Paid Family and Medical Leave program expenses are likely to continue exceeding revenues in future years. Changes to the rate formula could make the program more stable and promote financial sustainability.
Key points
- The Employment Security Department (ESD) has collected $4.5 billion in premiums and paid $4.2 billion in benefits on more than 700,000 claims through December 2023.
- The premium rate formula in statute does not produce enough revenue to cover program expenses.
- ESD forecasts the program will have a negative balance for portions of 2025 and 2026.
- JLARC’s consulting actuary recommends using a forward-looking rate-setting approach and maintaining a financial reserve.
- ESD has implemented essential parts of the program. However, it needs to address project prioritization, employer audits, and customer service timeliness to meet best practices.
Legislative Auditor’s recommendations
The Legislative Auditor makes four recommendations.
Recommendation #1
The Legislature should implement a forward-looking rate-setting approach that maintains a sufficient financial reserve for the PFML program.
ESD should ensure that legislators and legislative staff have the information necessary to implement the forward-looking approach. This approach would replace the current statutory formula.
Actuarial best practices recommend incorporating trends in claim experience, potential future economic shifts, and demographic changes into the rate-setting process.
Legislation Required: Yes
Fiscal Impact: Depends on statutory language.
Agency Response: ESD concurs.
Recommendation #2
ESD should adopt criteria for its compliance audit program.
Best practices include assigning audits based on specific criteria (e.g., employer size) and determining the percentage of employers that will be audited each year.
Legislation Required: None
Fiscal Impact: JLARC staff assume this can be completed within existing resources. If ESD believes additional resources are needed, it should include that information in its future budget requests.
Implementation Date: November 2025
Agency Response: ESD concurs.
Recommendation #3
ESD should adopt quantifiable customer-oriented performance measures for claims processing and call center management.
Best practice is to establish specific and actionable performance measures. In developing these measures, ESD should conduct outreach to its customers and stakeholders.
Legislation Required: None
Fiscal Impact: JLARC staff assume this can be completed within existing resources. If ESD believes additional resources are needed, it should include that information in its future budget requests.
Implementation Date: November 2025
Agency Response: ESD concurs.
Recommendation #4
ESD should develop a documented and transparent process for prioritizing projects.
ESD should document its procedures and decision-making throughout the prioritization process. Project assessments should be updated to accurately reflect the relative risk of each project.
Legislation Required: None
Fiscal Impact: JLARC staff assume this can be completed within existing resources. If ESD believes additional resources are needed, it should include that information in its future budget requests.
Implementation Date: November 2025
Agency Response: ESD concurs.
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