New Mandated Payroll Tax to Pay for Long Term Care Benefits in Washington State
Washington state is the first in the nation to adopt a state-run long-term care (LTC) services and support trust program.
In 2019, Governor Jay Inslee signed SB 1323 amending RCW 50B.04 to provide for the state’s long-term care services and support trust program, known as the WA Cares Fund. Washington, like many other states, has an aging population, and each year more and more people over the age of 65 will need some sort of support service. The hope is that by putting this program in place now, Washington will mitigate part of this problem.
What is long-term care? What is long-term care insurance?
Long-term care includes a variety of services designed to meet a person’s health or personal care needs during a short or long period of time. These services help people when they need assistance to perform everyday activities on their own, such as bathing, dressing, and cooking meals.
Long-term care insurance provides the means to cover part or all of the costs for such services.
What benefits does the WA Cares fund provide?
Individuals can receive up to $100 per day to cover long-term care costs, with a maximum lifetime benefit of $36,500.
Note that benefits are not available outside of Washington state, and the benefits only cover the employee who is contributing through payroll, not their spouse or dependents.
To qualify for benefits from the WA Cares Fund, you must have worked and contributed to the fund for:
- At least ten years at any point in your life without a break of five or more years within those ten years, or
- Three of the last six years at the time you apply for the benefit, and
- At least 500 hours per year during those years.
Who is subject to this new tax?
All private and public employers with a Washington employee, except for the federal government and federal tribes, must collect the new tax. This means that most employees in the state must pay the new tax.
How much money will be withheld from my paycheck?
Starting in January 2022, employers must withhold a new 0.58% (.0058) payroll tax from all employee wages. The tax will be withheld through mandatory paycheck withholdings. All compensation is subject to this tax with no income cap. For example, if the gross amount of a paycheck (before deductions are withheld) is $2,000, $11.60 will be withheld from the paycheck for this tax.
How can employees opt-out of this new payroll tax?
Employees that have their own long-term care insurance policy in place before November 1, 2021 can opt-out permanently from this tax. The long-term care insurance policy must provide equal or better benefits than the WA Cares Fund. Employees will be required to submit an exemption application to the Employment Security Department (ESD). Exemption applications will be available starting October 1, 2021. Employers can sign up to receive updates from the WA Cares Fund as more information becomes available here. Or email directly towacaresfund@dshs.wa.gov
What should employers consider doing now?
- Employers should prepare for the employee payroll deductions and related reporting that will start in 2022, which may include confirming that their payroll vendor is making the necessary changes to enable them to start collecting the contributions and submitting the reports when required.
- Employers should consider providing information to employees about the WA Cares Fund, including information about the payroll deductions and upcoming deadline for the opt-out exemption. In August, a new website will be released to help employers. Check out www.wacaresfund.wa.gov/employer-toolkit
- Employers will want to be sure that they have an internal process in place to collect opt-out approval letters from employees, to cease payroll contributions for any employee who provides an opt-out approval letter and to retain copies of any opt-out approval letters they receive.
- Employers considering offering long-term care insurance to their employees so that employees can opt out of the WA Cares Fund will need to act quickly to ensure that the coverage is effective before November 1, 2021. It is important to note that unless the law is amended, there will be no opportunity for employees to opt out of making payroll contributions if they enroll in long-term care insurance on or after November 1, 2021. And, if employees opt-out of the program, it is permanent and they cannot join in the future.
Contact Information is here: http://www.wacaresfund.wa.gov/contact-us/
