Cost of Living Adjustment (COLA) from L&I and the Washington State Accident Fund

Cost of living adjustment under an L&I claim

In short, L&I benefits 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 employees’ average annual salary 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 review 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, state 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 for 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 important discounts in the rates 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 no coincidence that L&I rates had to increase after employer reimbursements.

L&I Work Injury Insurance Rates in Washington State

Employer reimbursements depleted the Accident Fund. Therefore, L&I implemented a work injury insurance rate increase to fix it. Business and labor stakeholders at the Workers’ Compensation Advisory Committee (WCAC) decided to do something about it. Explicitly, the WCAC set targets to ensure that reserves in the Washington State Accident Fund are sufficient to withstand 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 an $8.8 billion revenue shortfall 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. That is why, now more than ever, it is important to focus and monitor the financial health of the Accident Fund.

A workers’ compensation attorney’s point of view

Our (currently) healthy workers’ compensation ecosystem provides a critical safety net for working families. That safety net prevents financial ruin when a catastrophe strikes. For that reason, we must actively resist the types of Accident Fund depletion 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 with rate increases later. To learn more about this issue, please read this recent article. It was written by The Stand, which is a publication for workers in the state of Washington.

This article was first published at https://tarareck.com/l-and-I-cost-of-living-adjustment/