Senate Labor & Commerce Committee members considered Senate Bill 5381, a Department of Labor & Industries (L&I) request bill that would authorize L&I to administer and pay workers' compensation claims after certification of a self-insured employer or self-insurance group is withdrawn, with the decertified employer required to reimburse the department.

Susan Jones, committee staff, outlined the bill's background and mechanics: self-insured employers—public or private entities that meet statutory standards—are responsible for their claims, but when certification is withdrawn certain liabilities remain. "A self insurer's insolvency trust is funded by an insolvency assessment," Jones said, and the bill directs L&I to adopt rules to manage claims and recover payments from decertified groups.

Tammy Phelan of L&I described the bill as a narrow fix to legislation passed in 2023. She told the committee that once a claim is designated self-insured it remains self-insured and that the department does not collect premiums to cover those costs; municipal self-insured employers typically are not required to post surety, creating potential gaps. Phelan said L&I needs rulemaking authority to determine how to administer and pay claims for decertified entities and to arrange for repayment mechanisms.

Committee members asked how often decertification occurs and how claims would be separated. Phelan said decertification is "exceptionally rare" and that L&I cannot recall recent decertifications under the good-faith-and-fair-dealing standard; she said about 360 self-insured employers exist in the state, roughly 70 of which are municipal employers that fall under the bill's proposal. Phelan confirmed that claims that were self-insured would continue to be treated as self-insured claims and would be administered and funded separately from ongoing premium-based accounts.

Chris Teft of the Washington Self Insurers Association said the association took a neutral position on the bill and warned that related 2023 provisions—including a "three strikes" automatic decertification regime inserted late in that session—could create large, sudden liabilities for L&I. Teft urged a cautious approach and a broader discussion before applying similar provisions to all self-insured employers.

No committee vote was recorded in the hearing; staff and witnesses said the bill establishes a framework for L&I rulemaking and leaves actual repayment and process details to administrative rule development.