Washington Care Funds
01
What
The Washington State Payroll Tax is the state’s solution to the rising costs of long-term care. Washington is the first state in the US to implement this tax. It is set to be funded by 0.58% of all employee wages and goes in force January 1, 2022. Unlike many other state sanctioned insurance programs, the contributions per employee are uncapped. For example, an individual who earns $180,000 a year will pay $1,044 and a person who earns $70,000 will pay $406. All forms of compensation including stock, bonuses, paid time off, and severance are subject to the tax.
02
Who
The long-term care benefits of this tax are payable only once an employee has paid the premiums for a total of 10 years without a five-year consecutive break. After they have done this they are permanently vested and will have the benefits for life. They can also pay three years within the last six years from the date of application to be temporarily vested. Temporary vesting will un-vest after a set amount of time. This means that those who are planning on retiring in the next 10 years are at risk of paying premiums for an insurance they may never qualify for. Those who reside in Washington and decide to move out of state after retiring will not be eligible for any benefits.
03
Benefits
If one cannot complete three of 10 activities of daily living, or ADLs, the program will provide $100 a day with a lifetime limit of $36,500. Benefits will become available January 1, 2025.
According to the actuarial firm hired by the state to review the program, approximately 45% of residents could receive the same coverage on the private market for equal or lesser money. This statistic only considers the actual money, not the benefits that come along with private insurance such as portability outside Washington, better inflation protection, ability to cover partners and spouses, and coverage outside the United States. The way the bill was written also allows the tax amount to change every two years starting in 2024. The 0.58% that is being established could - and very likely will - rise as soon as is eligible.
04
Opt Out + Exemptions
You must have another long-term care insurance policy in force by November 1, 2021. Those who do have a policy in force by the deadline must submit applications for exemption to the state. These will be accepted starting October 1, 2021 and will go until December 31, 2022.The tax goes into effect 1/1/2022, so if you have purchased a privatized long-term care insurance policy and wait until the end of 2022 to submit your application for exemption, you will be effectively “double-dipping” in payments. These payments made to the state are non-refundable.
Other exemptions include those who are: self-employed, employees of a federally recognized tribe, or collectively bargained employees who had contracts in force before October 19, 2017.
If you have not purchased private long term care insurance by November 1, 2021, there are others factors that could make you exempt from paying the tax.
Other exemptions include those who are: self-employed, employees of a federally recognized tribe, or collectively bargained employees who had contracts in force before October 19, 2017.
05
Additional Resources
If you’d like to get additional coverage to have a more robust long term care plan, please feel free to reach out to us. A lot of long term care insurance companies paused sales in the state of WA. As more insurance companies re-enter the state of WA, we can help you with more customized plans.
Timeline:
Nov 1, 2021: Deadline to have Long Term Care Insurance Inforce for Opt-Out
Oct 1, 2021 – Dec 31, 2022: Exemption + Opt-Out Application Due Dates
Jan 1, 2022: LTC Tax goes into effect
2024: Tax rates can be adjusted if needed by the state
January 2025: First benefit available to be paid
Recommended Reading
Most states offer LTC government programs with incentives for those who buy LTC insurance.
Long term care insurance premium increases have recently been in the news.
Have you considered making a strategy to prepare for an unexpected long term care event?