Washington State Long-Term Care Tax
What is the Washtington State long term care tax?
In 2021, House Bill 1323 was passed which creates the Long-Term Services and Supports Trust Program also called the “LTSS Program” or “WA Cares Fund”. The program imposes a 0.58% premium assessment on all Washinton employee wages. The new Fund paid for by Washington employees provides long-term care benefits to those that require financial assistance and meet the qualification requirements.
To be eligible to receive long term care benefits under the WA Care Fund, an individual must meet one of the following contribution requirements:
- An employee is temporarily vested if they have worked a minimum of 500 hours per year for three years within the last six years (from the date of application of benefits).
- An employee is permanently vested if they have worked at least 500 hours per year for at least 10 years, with at least five of those years being consecutive.
Once you’re vested, you’re insured against long-term care up to $36,500 over your lifetime.
What is the purpose of the WA Cares Fund?
The Medicaid program is jointly funded by the federal government and states. The federal government pays states for a specified percentage of program expenditures, called the Federal Medical Assistance Percentage (FMAP).
According to the WA Cares Fund website, long-term care is expensive and not covered by Medicare. Most will not have the savings to pay for it. Seven in ten Washingtonians will need long-term care during their lifetimes, and most older adults today end up relying on family members to care for them or impoverishing themselves to qualify for Medicaid.
The WA Cares Fund provides choices about how to receive care and a way to pay for it.
How long does an individual need to contribute to the WA Cares Fund?
There Is No Cap on the Amount of Taxed Wages. Unlike other state insurance programs, there is no cap on wages. All wages and other compensation, including stock-based compensation, bonuses, paid time off, and severance pay, are subject to the tax.
How can you avoid the WA Cares Fund payroll taxes?
An employee has a one-time opportunity to opt-out if they have comparable private long-term care insurance.
The employee must provide proof of their ESD exemption to their employer before the employer can waive collecting the premium assessment from the employee’s wages. The employee must apply for the opt-out exemption to ESD between October 1, 2021, through December 31, 2022.
What happens after you apply for an exemption?
You’ll get an exemption approval letter from ESD, at which point you’ll be:
- Expelled from the program with no option to re-enroll.
- Disqualified from accessing WA Cares benefits in your lifetime.
- Required to present your exemption approval letter to all current and future employers. If you fail to present your ESD approval letter, employers will withhold non-refundable WA Cares premiums.
Exemptions will take effect the quarter after your application is approved.
When does the Washington State long term care tax take affect?
Starting January 1, 2022, all Washington employee wages (those employees who work in Washington, receive wages reported on a Form W-2, and work at least 500 hours per year) are subject to a 0.58% premium assessment.
What if you are self-employed?
Those without W-2 income are exempt from the program but may choose to opt-in. Under the program, self-employed individuals must elect coverage by January 1st, 2025, or within 3 years of becoming self-employed for the first time.
You are considered self-employed if you are:
- A sole proprietor
- A joint venturer or a member of a partnership
- A member of a limited liability company (LLC)
- An independent contractor (as described in RCW 50A.05.010 (8) (b) (iii).
- Otherwise in business for yourself.
Note: You are NOT self-employed if you are an employee of a company you own, including being paid by the corporation. If this is your situation, you are required to withhold premiums and report yourself with all of your other employees.
Who is responsible for collecting the WA Cares Fund tax?
Employers are required to collect premiums through employee payroll deductions and remit proceeds to the Employment Security Department (EDS). This agency will deposit funds in a trust for the individual until they qualify for the benefit.
What happens if an employer is found to be non-compliant?
If ESD finds that an employer is non-compliant with collecting premiums from an employee:
- Past due taxes may be deducted from the employee’s paycheck (alternatively, employers may pay the past due premiums); and
- The employer must file an amended report and pay the past due premiums.
When do the benefits become available to Washingtonians?
Starting January 1, 2025, proceeds of this premium assessment will be used to provide long-term services and supports benefits to Washington State residents who have paid into the LTSS Program for a specific amount of time and who need a certain amount of assistance with activities of daily living.
Important dates for the WA Care Fund long term care tax
- Deadline to purchase LTC Policy is November 1, 2021
- Payroll deduction begins January 1, 2022.
- Services & support begins January 1, 2025
What wages are subject to the tax?
The tax applies to all wages and renumeration, including salary and hourly wages, stock-based compensation, commissions, bonuses, holiday pay, most paid time off, and severance pay.
For more on what wages are subject to the tax, see section 192-910-005 under the proposed rules.
Eligibility to Receive Benefits Under the LTSS Program
Starting January 1, 2025, an individual may receive benefits from the LTSS program if:
They are a Washington resident;
- At least 18 years old;
- Have either temporarily or permanently vested; and
- The Department of Social and Health Services (DSHS) has determined they need assistance with at least three activities of daily living (bathing, dressing, eating, personal hygiene, etc.).
For persons planning to retire in the next three years, the LTC insurance program will not be available.
Long-Term Care Benefits
Upon becoming eligible, a person may receive approved services of up to $36,500 over the course of the person’s lifetime. The DSHS will pay, in $100 per day increments (may be adjusted annually for inflation) for adult day services, in-home personal care, assisted living services, adult family home services, nursing home services, care transition coordination, dementia supports, home safety evaluation, adaptive equipment, respite for family caregivers, transportation, home-delivered meals, education and consolation, relative care, professional services, and services to assist family members to care for eligible individuals.
Who oversees the Long-Term Services and Supports Trust Program?
The LTSS Program will be administered jointly by the DSHS, ESD, the Health Care Authority (HCA), and the Office of the State Actuary (State Actuary). Their respective roles will include:
- DSHS: Makes determinations regarding eligible beneficiaries, services, and providers. Disburses payments, provides educationalmaterials, and addresses customer service issues.
- ESD: Assesses and collects employee premiums, monitors the LTSS Program’s solvency.
- HCA: Determines status of qualified individuals, assures that services are provided, establishes criteria for making payments to providers.
- State Actuary: Performs actuary audits and valuations every two years.
An LTSS Commission will be established and include legislators, agency directors, representatives from numerous long-term care organizations, a long-term care worker, and an employer who collects and remits the premium assessment from its employees. It will establish rules and policies for the LTSS Program, monitor the LTSS Program’s solvency, and make annual reports to the Legislature.
What About Employees Who Move Out of State?
Because benefits are limited to Washington residents, employees who move out of state will not be eligible to receive benefits under the Program. Employees who maintain a second home will want to consider which location will be their permanent residence.
Why is it important to have long term care?
Most older adults today end up relying on family members to care for them or impoverishing themselves to qualify for Medicaid.
- 7 in 10 Washingtonians over the age of 65 will need long-term services and supports within their lifetimes.
- To pay for long-term care, many people must spend down their savings to qualify for financial support.
- Family caregivers who leave the workforce to care for a loved one lose their own income and health and retirement benefits.
Reasons to opt-in to the WA Cares Fund payroll tax
- You only pay WA Cares Fund premiums while you’re working—not after retirement. Private long-term care insurance usually requires continuous payments. If you don’t keep up, your policy could lapse and leave you without coverage. Individuals with approved exemptions will never be eligible for WA Care benefits.
- Group policies, like those provided by your employer, likely do not follow you to your next employer. WA Cares will provide you with coverage as long as you work and retire in Washington state.
- No matter your age or health status, the WA Cares Fund provides affordable long-term care coverage. The current rate for premiums is only 0.58 percent of your earnings.
- After you’re fully vested, your WA Cares benefits will be available when you need them, even if it’s 20 or more years after you retire..
- You may be eligible for benefits even if you’re not permanently vested.
- You can supplement your WA Cares coverage at any time. If you choose to also purchase private long-term care insurance, you’ll still get the benefits of WA Cares.
- The WA Cares Fund will allow you to reimburse a qualified family member for providing care in your own home, including a spouse.
Are there other options?
Yes, if you have an existing whole life insurance policy, you may be able to add a Long-Term Care Rider to that policy. This approach could be solution for a younger employee under 30 who would not be eligible to apply for a traditional LTCi policy.
There are additional insurance options available to you, such as utilizing a life insurance policy with added benefits for long-term care if you ever need them. These include hybrid policies and single pay, asset-based policies that could provide better long-term care coverage for you and would be considered comparable to the state program, exempting you from the payroll tax.
We have several options for long-term care that will satisfy an exception from the Washington State WA Cares Fund tax.
It is important to move fast to meet the November 1, 2021 deadline.
Because of the huge influx of applications, underwriting times may take up to 2 months, depending on the company you choose to apply with.
Washington Long Term Care Policy Request Form
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- House Bill 1323, LONG-TERM SERVICES AND SUPPORTS TRUST PROGRAM—VARIOUS PROVISIONS.
- Chapter 192-900 WAC section 192-910-005, DEFINITIONS.
- RCW 50B.04.080, Premium assessment—Rate—Collection
- RCW 50B.04.085, Premium assessment—Exemptions.
- Washington State WA Cares Fund website
- Washington State Hospital Association, New State Employee Payroll Tax Law for Long-Term Care Benefits.