Vol. 3, Issue 5

November-December 2004

Note:

This newsletter uses HTML. If you are using e-mail software that isn't HTML enable, or have the read-HTML option disabled, please follow this link to the newletter: http://www.aiawa.org/newsletters/1204newsletter.html.

Special Guest Column – Departing Past-President Rich Wagner

As the year comes to an end for this past president and it’s time for me to take my leave, our exec, Mr. Stan Bowman said he’d give me a few lines!

I joined the Executive Board four years ago, with great goals for the Council and a long to do list for myself. With the help of a lot of friends, I think we accomplished many of these goals, though I leave an ever-expanding list for those that follow.

I started work with the Washington Council in 1974, working with the Practice Resource Group. The hot issue for our profession back then was the Architects Licensing Law. It may be hard to believe now, but there was a time we architects only had a title act with no regulations about practice and professionalism. Now, we’re so practiced and professional, that we need lawyers to do architecture! Is this better? As with much of the world today, it’s our reality. It is in this reality that the Council shines; where our interests are lobbied, prosecuted and defended; where we as AIA Architects carry a greatly respected legal voice in our State for professionalism, human equity, and the natural and the built environments.

Making our voice more learned, more articulate, more passionate and a whole lot louder was my biggest goal. And, we accomplished much of it. I know this voice comes with great risk. We have, and I hope will always have, many voices within our membership. We have R’s and D’s, reds and blues, North and South, East and West, large and small, … and that’s what makes our membership so wonderful. And that’s what demands that we always be good listeners. As the recount of the governor’s race reminds us, we are not 42 votes apart; we are 3 million votes together.

That’s what I find invigorating, and worth every effort.

I would like to give a special thanks to Bob Barger, Jack Wright and George Hartman, who were early mentors, when I was just a kid, and to Richard Hobbs, Jennie Sue Brown, Rob Widmeyer and Norm Johnston for their support, encouragement and friendship.

I would especially like to thank Mary Pennington (whom we all knew as Mary Mauerman), for her 16 years of guidance and leadership as the Council’s Executive Director. She made us all better than we could ever hope to be on our own. She made it easy and rewarding for all of us to be so active and so productive in Washington State government and in the National American Institute of Architects.

It’s always easy to reach further when you have some big shoulders to stand on! Thank you for giving me your confidence and allowing me the privilege to serve.

Parting is ~~such~~ sweet ~~sorrow~~.

Rich Wagner, AIA
Past President
AIA/Washington Council

Capitol Connections Set for February 1, 2005

The AIA Washington Council worked hard to elect legislators who will promote the better interest of Washington and Washington architects. Thanks to the generous support of our members, AIA supported 62 candidates for state legislative offices. With the conclusion of the elections, it is time to get down to the tough work of legislating.

Capitol Connections is the opportunity for Washington Architects to learn more about legislation impacting your practice and to talk directly with lawmakers. The event will begin over lunch with a briefing on AIA/WA’s legislative priorities and presentations by experts on public policy. AIA/WA is setting meetings with your legislators so every AIA member has an opportunity to talk with them about their priorities and concerns.

A highlight of the day will be guided tours of the newly renovated State Capitol Building and the Temple of Justice (where the Washington Supreme Court meets). AIA members will be among the first to get a behind the scenes look at these magnificent restoration projects. Members of the design teams will lead the tours.

Finally, the day will end with a reception sponsored by the AIA/WA and the Washington Construction Industry Council. This reception provides architects an opportunity to mingle with lawmakers in a more informal setting and to network with key leaders in the state’s design and construction industry.

For more information on registering for AIA/WA’s Capitol Connections, visit the web site at www.aiawa.org or contact Kris Schwarz at kschwarz@aiawa.org or 800-722-0394.

AIA ArchiWire: AIA’s Latest Member Resource

You have just completed a truly outstanding project. The press is interested. When the articles are written, the owner and the contractor receive glowing praise for the project. But, you, the architect, are not mentioned anywhere in the article. It can be difficult for a professional trained to design to design your own public information strategy.

The American Institute of Architects has launched a new resource to help every AIA member reach out to the press. AIA ArchiWire is an architect-specific news resource website.

The hardest part of issuing a press release is not necessarily writing the release. Often, firms have many project descriptions from which to draw information about the project. The hardest part is getting the release in the hands of the press. And, not just to any reporter, but to the reporters that cover architecture, development and business issues. AIA has the solution.

AIA ArchiWire is an internet-based news service specifically designed for the architecture profession. It allows architects to post their press releases to a central location and know that architecture reporters will receive the information.

ArchiWire is also a resource for architects to stay abreast of the architecture news from AIA and from their area. The information can be sorted by location and project type.

For the next month, AIA members can post information without a fee. You are encouraged to post as much information as you like about completed projects, upcoming projects, firm news, staff changes, and so forth. The more information that is posted, the better a resource ArchiWire becomes for architects and the press.

After January, there will be a charge of $75 for AIA members ($150 for non-members) to post each press release. Compare that to $450-$500 cost to post a release on the AP Newsire or PR Newswire.

The alternative to using wire services is for your staff to extensively research media outlets that are most likely to publish your project, and send an individual press release to each of them. This can be a very time consuming and expensive project.

For the press and others who wish to review the posted press releases, there is no fee. This cost structure promotes the use of the service by the news media while maintaining reasonable fees for AIA members.

The AIA National Component press staff are actively promoting AIA ArchiWire to national, regional and local news outlets. They are doing specific promotions of the service and including information in their normal briefings of reporters.

When you support ArchiWire, you are supporting the AIA at all levels. The revenues from ArchiWire are being shared with the national, state and local components.

Check it out today, while it is free: http://archiwire.aia.org.

AIA/WA Sets an Ambitious Legislative Agenda for 2005

The business climate for architects is dependent, in part, of the actions of the state government. In recent years, the AIA Washington Council has increased its efforts to improve the business climate in Washington State for architects and architecture firms.

Liability/Tort Reform Tops the Agenda

The Council recognizes that the affordability and availability of liability insurance affects the ability of architects to provide architectural services and impacts the public's right to adequate protection. Moreover, high insurance premiums and loss of coverage result, in part, from the high frequency of litigation, excessive jury awards, and the substantial transactional costs involved in litigation.

AIA/WA is working as part of the Washington Liability Reform Coalition (LRC) to pass omnibus liability reform. In the past two legislative sessions, we have been successful in passing reforms through the State Senate. However, they stalled in the House of Representatives.

Architect Licensing Law to be Updated

Washington’s architect registration law protects the public against harm and provides the foundation for a strong practice in our state. However, it has been some years since the law has been updated. In 2005, AIA/WA will seek to update Washington’s law to reflect common standards in other states. Some of the provisions that are being reviewed include the need for a mandatory professional degree from an accredited university or college, mandatory continuing education, and certain exemptions that conflict with other provisions or are inconsistent with the purposes of the act.

Interior Design Regulation

The Interior Design Coalition of Washington plans to introduce another registration proposal in 2005. The AIA/WA is in discussion with them about the details of the bill. In general, the AIA supports improving professional standards for any construction or design related industry. However, the 2004 legislation had several provisions that were problematic. AIA is hopeful that problematic provisions in the legislation can be amended or eliminated.

Sustainable Design

In 2004, the AIA/WA created a new Resource Group on sustainable design. The Council supports the principles of sustainable design as a means to sustain and improve the environment, and the role of the architect in preserving and protecting our planet from environmental damage.

We made great gains in the last two years with a series of gubernatorial executive orders promoting sustainable practices within state agencies. Executive Orders (EO) 02-03 and 04-06, require state agencies to develop biennial sustainability plans and implement sustainable practices in the design, construction and operation of state facilities.

While these EO’s are important, a subsequent governor can also change them. AIA/WA is working with a broad coalition to translate these executive orders into functional state laws promoting sustainable practices.

Condominium Liability Reformed, But not Fixed

In 2004, AIA/WA was successful in passing minor reforms to Washington’s liability laws in regard to the design and construction of condominiums. Condominium development has become a hotbed of litigation, with some lawsuits being filed even before the construction is completed. Predatory practices by unscrupulous lawyers are threatening to shut down what could be a very robust condominium market.

Condominiums and other multi-family housing options are important to preventing sprawl and promoting affordable housing. However, many architects and contractors are not able to purchase liability insurance to cover the design of these facilities. It is no longer just a matter of affordability (paying higher premiums for the insurance), but is now a problem of availability (most insurance companies will simply not offer coverage for these buildings). AIA/WA will continue to work with its coalition partners in the design, construction and development communities to pass condominium liability reforms.

Design/Build to Be a Priority

The final issue priority identified by the AIA/WA Council is the use of design/build procurement methods by state and local government agencies. Design/Build can be a very effective method of developing a project. However, it requires the client agencies to have a strong understanding of the process and to have a clear idea of what the final product is they desire to be constructed.

In general, most state and local government agencies do not have the necessary technical expertise or procurement experience to effectively utilize design/build. The traditional design-bid-build practice will produce a better building in most instances, for most agencies. It provides the client agency with greater flexibility in the process and protects the public’s interests by having the architect serve as the owner’s representative during the construction phase.

AIA/WA will work to educate lawmakers about the benefits and problems with this procurement practice.

Election Brings Winds of Change to Olympia

The 2004 elections brought many changes to Washington State. Some races were predictable; others were surprises. Through it all the Architects Political Action Committee of Washington played an important role.

Statewide Elections

On the statewide level, many changes occurred. The Republicans made gains in the number of statewide office holders. Prior to the election there were two Republicans, now there are three and possibly four.

The biggest change was Rob McKenna (R) winning the race for attorney general. He will be the first Republican to hold that office since 1992. He handily won a hotly contested race against former insurance commissioner Deborah Senn (D). The attorney general plays an important role in that the office advises all statewide agencies on rulemaking and liability issues. The formal Attorney General Opinions have the de facto effect of being law for state agencies.

There will also be changes on the State Supreme Court. While this office does not receive as much media or public attention as partisan offices, the Court has a big impact on the state. On his second try for the Court, Jim Johnson won a seat. A former assistant state attorney general, Johnson is one of the most expert lawyers on Washington State’s Constitution. He also has broad experience in construction law.

There have been a series of controversial 5-4 decisions issued by the court in recent years. Johnson’s presence on the Court has the potential to swing future decisions to a different direction. Given his significant experience and strong legal reputation, he is likely to have an immediate impact on the dynamics that formulate Court decisions.

Governor’s Race Still Not Finalized

The big news statewide continues to be the closely contested race for Governor. Republican Dino Rossi has come out on top in two statewide counts, but by very narrow margins. The Secretary of State and current Governor have certified him as the governor-elect.

However, Democrat and current attorney general Christine Gregoire is still vying for the office more than a month after the formal election date. Because of the closeness of the race, Gregoire and the Democrat Party are paying for a third statewide count in the race. This count will be conducted by hand. The results are expected to be announced by Thursday, December 23.

Democrats Make Gains in Legislature

In the state legislature, the Democrats have a solid majority in both Houses for the first time in many years. Democrats controlled both chambers for legislative session in 2002, but had only a one-vote majority in the Senate.

In the House, Speaker Frank Chopp has expanded his majority by three seats to 55. The Republicans will have 43 seats. With a larger majority it will easier for Chopp to move controversial legislation through the chamber. In the past, some bills have been held-up by a handful of moderate Democrats who side with Republicans at times. Now, Chopp can lose 5 members and still pass a bill.

In the Senate, the Democrats regained the majority by knocking off two incumbent Republicans and holding on to all of their seats. With a 26 to 23 majority, they too will have some more leeway to move bills through the process. Senator Tim Sheldon (D-Shelton) has been a wildcard in the past and sided with Republicans on many controversial issues. With a two-seat majority, Sheldon will no longer be the decisive factor on as many issues.

Legislative Changes will Affect AIA/WA’s Agenda

With the Democrats in solid control of the legislature, new opportunities will appear for architects, as well as new challenges.

Issues like tort reform and small group health care reform are likely to not receive much attention in the next two years.

Moreover, there will likely be a strong push to expand the benefits mandated to be included in employer-provided health insurance plans. At the top of the list will be mental health parity.

The state is projected to have a budget gap of $1.5 to $1.7 billion facing the legislature and the new governor. In the past few years, budget gaps have been closed without major new taxes or fees being imposed. As such, many groups that heavily supported the Democrats are anxious for a return on their investment. There will be a strong push for new taxes from the unions and social liberal wing of the Democrat party.

The teachers’ union, state employees’ union and the Service Employees International Union will strongly push to have their outstanding contracts ratified by the legislature. This would dramatically increase the budget gap and increase the pressure for new taxes. Also, a priority of the unions has been a comprehensive review and repeal of tax exemptions, including the exemption of professional services from the sales tax. The AIA/WA will closely monitor any tax bills that could adversely impact the profession.

Before leaving office, Governor Gary Locke (D) announced a proposal for a $500 million tax increase to help bridge the budget gap. Democrat budget chairs in the House and Senate indicated they will consider the tax increases and are open to implementing some or all of Locke’s recommendations. Republicans have denounced the idea that raising taxes is necessary or prudent.

At the same time, the make-up of the legislature opens new doors to promote sustainability, specifically the legislative adoption of Governor Locke’s Executive Orders mandating agency sustainability plans and building development to LEED Silver standards. Other issues like the adoption of additional building codes on energy and existing buildings could receive greater attention from the legislature.

The wild card in this process remains the next Governor. If Governor-elect Rossi holds on to win the final recount, then dynamics of the legislative process will completely change. For instance, he has already announced he will not support any new taxes. What we don’t know is the posture that the Democratic leaders and Rossi would take toward one another. As Senate Ways & Means Committee Chair, Rossi reached out to moderate and conservative Democrats to move a bi-partisan budget over opposition from the Democrat leaders. Similar coalition building will be much more difficult in the current legislative environment, but still possible.

Rossi campaigned on a platform of supporting comprehensive tort reform, small group health care reform and regulatory reforms – AIA/WA priorities in recent years. If certified again as the winner, he is likely to try to leverage his authority as governor to move these issues in the legislature.

If Gregoire is successful in changing the outcome of the election in the third count, then the Legislature’s priority issues will become clearer. Clearly, tort and health care reforms would fall off the table. However, because she has taken moderate stances on budget and tax issues, she could be at odds with the much more liberal leadership of Speaker Frank Chopp (D) and Senate Majority Leader Lisa Brown (D) over the proposed $500 million tax increase.

Architects PAC Active in the 2004 Elections

The AIA/WA’s Architects’ Political Action Committee (APAC) of Washington was an active player in the 2004 election. Overall, APAC raised over $34,000 in this election cycle. Contributions came from every component and every corner of the state.

The APAC board carefully reviewed every candidate running for state-level office in 2004 to determine whom to support. Each race was individually considered and weighted for support.

In the end, APAC supported four candidates for statewide office and 62 candidates for legislative office in the House and Senate. All four statewide candidates won their races. On the legislative level, 50 APAC-supported candidates came out on top, for a success rating of 81%. This is a very good success ratio for the number of races where the AIA was active.

Of the 12 races in which the APAC supported candidate did not win, 5 were decided by 4% or less (one was at 0.33%). Three of the races are ones in which the incumbent legislator lost to a challenger, an unusual event in most elections.

As far as expenditures, APAC spending and number of contributions were nearly evenly divided by Party. APAC strives to be bipartisan, while supporting each candidate based on his or her individual merits, regardless of partisan affiliation.

The AIA/WA Leadership thanks every AIA member who supported APAC in 2003 and 2004. Your efforts help AIA to make Washington a better state.

For further details on APAC and its contribution activities, contact Stan Bowman, Executive Director, at bowman@aiawa.org or 360.352.1870.

Health Care Costs Continue to Rise

IHeath care insurance costs continue to rise around the nation. Washington state continues to outpace much of the nation with its rapidly rising insurance costs. According to recent press reports, employers will experience their fifth year in a row of double-digit insurance premium increases in 2005.

Depending on the type of plan and size of the company, national health insurance plan prices are expected to increase an average of 12.4% to 13.1%. The good news is that in 2004 prices went up 13.7% to 14.4%; so the increases are slowing. Through careful management of a company’s insurance plan details, a company can cut the impact of that increase down to as low as 9.5%.

In Washington State premiums are expected to rise between 15% and 19%. Careful management of health plan details might allow employers to cut these costs down to 10% to 14% by the time increases hit their employees.

While the rate of increase is expected to be slightly lower, the real dollar cost of health insurance may actually be the same or higher than in previous years. The cumulative effect of many years of double-digit inflation has created a higher price base to start.

The AIA Washington Council is tackling the health care insurance price increases on two fronts: legislatively and by offering better benefits.

According to a study from the Washington Policy Center, a non-partisan policy center in Washington State, there are 47 state-mandated benefits required to be included in health insurance policies in our state. This is up from 10 in 1980 and 30 in 1990. A US General Accounting Office report found that states with a high number of mandates have consistently higher insurance rates.

The AIA/WA has been working with a broad coalition of employer organizations to remove some of these mandates and allow small employers (those with under 50 employees) to offer a basic set of health benefits coverage. These mandates inordinately impact small employers because larger employers (50 or more employees) can purchase health insurance plans governed by federal law, which include fewer mandates. Even with these reforms, employers would be able to add back benefits to their plans that may no longer be mandated by state law.

In 2004, the small group health plan bill nearly passed the legislature. It had been passed by the State Senate, but was watered down in the House. The final bill that passed did not reform mandated benefits. The AIA/WA will make this issue a priority for 2005.

On the national level, the AIA is supporting a bill to create association health plans (AHPs). These plans would allow the AIA and other membership non-profit associations to pool their entire membership base for purposes of negotiating health insurance rates. Currently, while the AIA members fall within a common risk category, they must still negotiate the specific rates directly with the insurance company. Thus a small employer does not have the bargaining power of a very large employer.

AHPs would give AIA/WA the full bargaining power of its 2,200 members. On a national level, the AIA national component may be able to negotiate on behalf of its over 80,000 members. These new negotiating positions would lead to lower premiums for AIA members and their firms.

Another important facet of AHPs is to bring these plans out from under state regulation and under federal laws for purposes of mandated benefits. Thus, the high number of state mandates in Washington would no longer penalize Washington’s small employers.

On the benefits front, AIA is working with Acordia, a multifaceted insurance broker, to develop and offer insurance plans for AIA’s members. In 2004, the AIA/WA and Acordia worked with Kitsap Physician Services (KPS) to create a new small group health insurance plan for AIA members. This plan is designed to be competitive in the Washington marketplace. In addition to three health plans with KPS, Acordia also offers AIA members and their firms four plans with Group Health Cooperative and four plans with Washington Dental Service.

Acordia was selected to work with the AIA after an extensive evaluation of qualified brokerage firms by the AIA/WA Executive Board. Acordia impressed us with their breadth of experience and ability to write competitively priced policies.

If you would like to have Acordia evaluate your health insurance plan, contact Brandon J. Boynton, AIA Account Executive, at 800.876.0505 ext. 5892 or brandon_boynton@acordia.com. You can get more information on AIA/WA’s website at http://www.aiawa.org/benefits.html.

Governor Locke Exits with a Pitch for Sustainable Design

Governor Gary Locke (D) will be ending his 8 years as governor with a legacy of promoting environmental sustainability. In the last several years, there has been a flurry of activity from the Governor, but these proposals are based upon years of work behind the scenes by the AIA Washington Council, other organizations and state agencies.

In 2002, Governor Locke issued Executive Order (EO) 02-03 requiring all state agencies to develop biennial sustainability plans. These plans were to identify how an agency addresses its “resource consumption; vehicle use; purchase of goods and services; and facility construction, operation and maintenance.”

Central to these plans was the idea that state agencies would identify how they will utilize sustainable design and construction practice in their development of state facilities.

In November 2004, Locke went further and required specific “sustainability and efficiency goals for state operations” in Executive Order 04-06.

This EO states that “the use of green building practices can improve employee productivity, improve building operational performance, reduce building operating costs and improve compatibility between the natural and built environments.”

While EO 02-03 set broad goals, EO 04-06 set very specific requirements. It requires that “Agencies incorporate green building practices in all new construction projects, and in major remodels that cost over 60% of the facility’s assessed value.”

Specifically, it requires that construction projects and major remodels over 25,000 gross square feet be “built and certified to the U.S. Green Building Council Leadership in Energy and Environmental Design (LEED) Silver Standard (or certified to an equivalent standard as approved by the Department of General Administration).”

For smaller projects between 5,000 and 25,000 gross square feet the state’s General Administration will “develop and implement a review process to ensure that green building performance standards consistent with the U.S. Green Building Council (LEED) Silver Standard are being applied, wherever appropriate. However, LEED Certification will not be required for these projects.”

These new directions are good news for Washington’s citizens who are paying for these projects. Architects will be at the lead of the changes because the new order affects all projects in predesign phase over the next two years.

Even though the AIA/WA is excited about these new directions in state government, we are also cautious that these rules could end with Locke’s administration. Executive orders while binding on state agencies also can be changed at any time by subsequent governors. AIA/WA will be actively working with the legislature to see these issues addressed in statute and educating the next governor on their importance.

For more information visit Governor Locke’s web site at http://www.governor.wa.gov. Also visit General Administrations new sustainability web site at : http://www.ga.wa.gov/Sustainability/index.html.

New Overtime Rules in Place, Will Impact Architecture Firms

As you may have read the federal Department of Labor has adopted new rules governing the application of laws on overtime hours and pay. The rules affect not only what constitutes overtime but to whom it shall apply. Several categories of workers were shifted into and out of this requirement.

The federal changes only affect “white-collar” workers, those in the professional, administrative and executive designations. The professional designation typically includes architects, engineers, intern architects, engineers-in-training and other staff who have specialized training and experience.

However, many of the new rules will not apply to businesses in Washington State. Washington’s overtime laws are more stringent than the federal government and are not about to change anytime soon.

According to the Department of Labor & Industries (L&I), “Employers are required to follow the rule that is most favorable to each specific affected worker. It is essential that employers review both state and federal laws on the particular exemption to determine whether the exemption may be applied.”

Moreover, L&I advises that “Overtime exemptions are determined on a case-by-case basis, so it is important to review the details about your particular circumstances and compare them against the new federal rules.” It is vital for firms to consult legal counsel or a human resources expert when updating your employment rules to comply with the new law.

Thus, it is not just a simple matter of following the state rules. Employers must review both the state and federal laws to determine which set of rules are more favorable to the affected worker. If the employer makes a wrong interpretation of the complex integration of state and federal laws, it could be subject to penalties from either the state or federal labor agency.

One big change is the category of workers who are not exempt from overtime pay. Under Washington law any worker who earns less than $250 a week must be paid overtime. Under the federal law, this provision is increased to $455 week or $23,660 per year.

Recent state court decisions have added additional complications to an employer’s liability and responsibility.

As reported by the Association of Washington Business, “In 2000, the Washington Supreme Court ruled in a 5-4 decision that employers in Washington State cannot necessarily rely on federal rules and guidelines to determine compliance with state wage & hour laws even where there are no state rules or guidelines in Drinkwitz v. Alliant the Court determined that employers can look to federal rules for guidance but cannot rely on them.”

This decision reversed years of customary practice at L&I when applying such laws. In 2003, the State Senate passed SB 5462 to allow employers to rely on federal labor standards when state law is silent. However, the State House of Representatives failed to act on the bill and it made no further progress in 2004.

Again, the AIA/WA strongly encourages architecture firms to consult with their personnel experts and legal counsel prior to better understand this complex web of rules.

The Department of Labor and Industries has developed a number of resources to explain the new system on its web site: http://www.lni.wa.gov/WorkplaceRights/Wages/Overtime/default.asp.

For details on the federal requirements visit the US Department of Labor: http://www.dol.gov/fairpay.

Brace for Higher Workers Compensation Taxes in 2005

Washington employers will once again face higher employment taxes in 2005. Industrial insurance (workers compensation) tax rates have steadily increased over the last four years. The average rates have increased nearly 50% over the last four years. For architects, rates have increased 43%.

In 2006, rates will again increase an average of 3.7%. Architecture and engineering rates will increase 7%.

Rates are increasing for a number of reasons. Recent state court decisions have greatly expanded the scope of benefits included in wage calculations for injured workers. Now included in the calculation is health care compensation and a myriad of other fringe benefits that were previously not included. Also, it is believed that recent recession has contributed by some workers seeking higher workers compensation payments instead of unemployment insurance (or filing for workers compensation when their UI benefits expire).

Finally, several organizations have raised serious questions about the financial management practices of L&I. An independent review of L&I’s accounting practices by PriceWaterhouseCoopers LLP found that the agency may be under reporting the workers compensation fund balance by as much as $3.2 billion. L&I collects about $1 billion in workers compensation taxes annually. This is the result of years of overcalculating the funds needed to operate the fund and underestimating the revenue coming into the fund. The result is that for more than a decade, L&I has been padding the numbers and has never adjusted their errors in subsequent years.

In 2004, the State Senate passed SB 6414 to require annual independent audits of the workers’ compensation fund prior to rates being adjusted. In 2003, the Senate also passed SB 5378 and SB 5271 to curtail the rapid expansion of benefits being declared by the courts. Unfortunately, none of these bills were considered in the House and died without a hearing.

New UI Tax Rate Structure Takes Effect in January

There is good news on the horizon with major unemployment insurance reforms being implemented in 2005.

In 2003 the Washington State Legislature passed a major overhaul of the Unemployment Insurance (UI) system. The reforms ranged from changes in eligibility to the methods used to calculate the employer’s contributions (UI taxes). The benefit and eligibility reforms were implemented in 2003 and 2004.

Historically, an employer’s UI taxes were based on his/her utilization—the more UI claims from his/her employees, the higher the rate. Based on utilization, employers were assigned to one of twenty rate classes with a fixed rate. The 2003 legislation expanded the rate schedule from twenty classes to forty classes, adjusted the benefit calculations, and changed the “buy-down” option. Now if an employer increases 12 or more rate classes in the new 40 rate schedule, he can pay extra money now to save money in future years by having a lower calculation method for future contributions (see details below).

Thus, a small firm that lays off one or more employees would be able to “buy down” the impact of that decision, rather than face years of high UI tax rates.

The biggest change for employers is in how they will be placed in one of the new rate classes. Previously, all employers were evenly spread across the rate classes. When one rate class “fills up” employers were bumped up the chain to an open rate class. It is like being graded on a curve. Your individual employment history affects where you land, but you are also rated in comparison to other employers.

In the new system, firms are placed in a rate class based on their previous four year’s of experience. Basically, tax rate classes are a function of how much in taxes they have paid into the system and how much in benefits the state has paid to a firm’s former employees. The 40 rate classes allow for a more accurate placement and the strict calculation allows for a more accurate tax determination.

Also changed are the dramatic swings in overall tax rates due to changes in the economy. Under the old system when a recession would hit and unemployment would rise, the entire system was shifted to higher taxes. The new system includes a surcharge to cover such events, but the increases will occur more incrementally. When the economy recovers, taxes will be lowered more rapidly.

Firms will receive a mailing from Employment Security in early December with their 2005 taxes. The notice will also indicate where you will be on the new forty-rate class schedule. If you are eligible for a rate class “buy down,” a letter advising you of the opportunity and the method of calculating the additional contribution will be included with your statement.

For additional information visit the Washington State Employment Security webpage at http://fortress.wa.gov/esd/portal/unemployment.

AIA Washington Council

Stan L. Bowman
Executive Director
bowman@aiawa.org

Kris Schwarz
Administrative Assistant
kschwarz@aiawa.org

724 Columbia Street, NW, Suite 120
Olympia, WA 98501
(360) 943-6012
(800) 722-0394
Fax: (360) 352-1870

www.aiawa.org

Table of Contents