What is a Cost-of-Living Adjustment (COLA)?
By Dylan Driver, Attorney at Law
Governed by RCW 51.32.075, the Washington workers’ compensation COLA is an annual adjustment to certain workers’ compensation benefits, based on changes in Washington’s statewide average wage.[1] This adjustment accounts for changes in wage levels over time and is generally applied to qualifying benefits beginning July 1 each year.
This adjustment of certain workers’ compensation benefits based on changes in wages is a long-standing practice in Washington workers’ compensation claims. The Washington Department of Labor and Industries features historical COLA tables beginning with injuries occurring on or after July 1, 1971, reflecting this long-standing practice.[2]
How much was the July 1, 2026, COLA, and how is this calculated?
In 2026, the Department of Labor and Industries’ COLA is 4.9%.[3] This adjustment is not based on the employer’s payroll, the worker’s current salary, or the employer’s individual claim history. Instead, the COLA is a statewide adjustment based on the change in Washington’s average wage.[4]
To find the annual COLA, the Washington Employment Security Department (ESD) calculates the statewide average annual wage.[5] The Department of Labor and Industries will then use the change in that statewide average annual wage from the average wage to establish the workers’ compensation COLA. Benefits are recalculated annually to reflect this change. In simpler terms, the calculation is as follows:
COLA % = (new statewide average annual wage – prior statewide average annual wage) ÷ prior statewide average annual wage x 100
In 2025, Washington’s average annual wage was $95,160. ESD reported that this grew to $99,810 in 2026. If we plug in these values above, we are left with a 4.9% COLA.
Who is eligible to benefit from the 4.9% COLA?
RCW 51.32.075 dictates that adjustments are made each July 1 for people whose right to compensation was established on or after July 1, 1971.[6] For claims that were established on or after July 1, 2011, RCW 51.32.075 holds that a COLA adjustment is not made until the second July 1 following the date of injury or occupational disease manifestation. [7]
Why is the Washington workers’ compensation COLA performed annually?
The Washington workers’ compensation COLA exists to bridge the gap between past established benefits and the increasing wages in Washington.
As we know, workers’ compensation benefits such as time-loss and pension benefits can continue for a significant time after the injury date or manifestation of an occupational disease. As Washington wages increase, past established benefits become less effective than recently established benefits. The COLA keeps benefits fair to those who injured themselves in the past and updates those benefits to reflect the changing wage levels.
How is the COLA funded?
On open and active self-insured claims, the employer or TPA will recalculate and adjust benefits subject to COLA every July 1. However, for pensions, the annual COLA is funded by the Supplemental Pension Fund, established in 1971. Unlike the Accident Fund, which is paid entirely by the employer, the Supplemental Pension Fund is paid by the employer and the employee.[8]
Also unlike the Accident Fund, Supplemental Pension Fund assessments are not experience rated.[9] An employer’s experience factor will not increase because of a COLA.[10]
Which benefits are impacted by the July 1, 2026, COLA?
Under RCW 51.32.075, the COLA applies to the following benefits:
- Temporary Total Disability benefits, generally what we refer to as time-loss compensation;
- Permanent Total Disability;
- And death benefits.
How is the COLA applied to the worker’s benefits?
To apply the COLA to a worker’s current benefits, multiply the current benefit rate by 1 plus the COLA percentage (1.049) to get the adjusted benefit rate. Please also see the equation below:
Current benefit rate x 1.049 = adjusted benefit rate.
If an employer has any questions about the 2026 COLA and how this impacts their claims, our Washington practice group can help. We welcome the opportunity to assist employers with this annual adjustment as well as a variety of other issues that may be impacting your claims.
[1] See Wash. Rev. Code § 51.32.075.
[2] Wash. State Dep’t of Lab. & Indus., Claims Management Tools, https://lni.wa.gov/insurance/self-insurance/claims-management/claims-management-tools.
[3] Wash. State Dep’t of Lab. & Indus., Workers’ Compensation Benefits to Increase by 4.9 Percent (July 1, 2026), https://www.lni.wa.gov/news-events/article/26-10.
[4] Id.
[5] Wash. Rev. Code § 50.04.355(2).
[6] Wash. Rev. Code § 51.32.075(4).
[7] Id.
[8] Wash. State Dep’t of Lab. & Indus., Rates for Workers’ Compensation, https://lni.wa.gov/insurance/rates-risk-classes/rates-for-workers-compensation/.
[9] Id.
[10] Id.