Cost of living adjustment under an L&I claim
In summary, L&I profits will increase a little over 6% this year. This is a historically high increase. Last year, the cost of living change of 5.5% was also historically high. COLAs are based on the average annual salary of all workers in the state of Washington. For the increase to be greater than 6%, the average annual salary of employees must also increase by a similar amount. For work injury claimants, this news couldn’t come at a better time. If you would like to review more information about COLA this year, please refer to the 2020-2021 Schedule of Benefits.
However, we must also think about the future considering our current reality. Businesses, workers, and employees have been severely affected by the COVID-19 pandemic. Consequently, unemployment rates are very high. And many businesses have been forced to close. Some of those closures are temporary. However, many are permanent. This is especially true in certain industries like hospitality and retail. Both are industries that previously employed many workers. The Corona virus will have a negative impact on our economy for quite some time.
What is the L&I accident fund?
The Department of Labor and Industries administers the Accident Fund. Let’s say she had a workplace injury. Also, say that he is receiving payments and financial benefits under his workers’ compensation claim. So, it is important to know that the money comes from the Accident Fund.
Previously, economic downturns had a negative impact on the financial health of the Accident Fund. Specifically, during the economic waves of the early and mid-2000s, Washington State businesses experienced increases in L&I fees. In other words, employers had to pay higher work injury insurance rates to the fund. In 2003, the rate increase was a staggering 28.8%.
Beginning in 2007, we saw four consecutive years of L&I rate increases. Unfortunately, these rate increases were necessary. The companies received significant rate discounts that left the Accident Fund almost empty. In fact, there were $200 million in workers’ compensation reimbursements to employers in 1999 and 2000, and $315 million in reimbursements in 2007. It’s not a coincidence that L&I rates had to increase after employer reimbursements.
L&I Work Injury Insurance Rates in Washington State
Employer reimbursements exhausted the Accident Fund. Therefore, L&I implemented a rate increase for workers’ injury insurance to fix it. Business and labor stakeholders on the Workers’ Compensation Advisory Committee (WCAC) decided to do something about it. The WCAC explicitly set goals to ensure that the reserves in the Washington State Accident Fund are sufficient to weather the next recession. Thanks to COVID-19, that next recession is already knocking on our door.
Currently, the Accident Fund is healthy enough to sustain the coming recession. Interestingly, recent forecasts estimate that the Washington state government faces a revenue shortfall of $8.8 billion through 2023. That kind of shortfall will require cuts. Because the Accident fund is healthy, the workers’ compensation system is going to be an easy target for tax cuts. For this reason, now more than ever, it is important to focus on and monitor the financial health of the Accident Fund.
The point of view of a workers’ compensation attorney
Our (currently) healthy workers’ compensation ecosystem provides a critical safety net for working families. That safety net prevents financial ruin when catastrophe strikes. For that reason, we must actively resist the kinds of Accident Fund depletion we saw in 1999, 2000, and 2007.
As a society, we cannot afford to drain this fund of workers’ compensation insurance and hope to salvage it with rate increases later. For more information on this issue, please read this recent article. It was written by The Stand, which is a worker’s publication in the state of Washington.
This article was first published at https://tarareck.com/l-and-I-cost-of-living-adjustment/
