Update - On December 17, 2021, the state paused implementation of the WA Cares Fund. Until a future announcement is made, employers will not be required to collect the payroll deductions or remit them to the sate.
Summary
The State of Washington is implementing a new Long-Term Care program – “WA Cares Fund.” The program provides state benefits funded through a payroll tax. They have a pretty useful website at http://www.wacaresfund.wa.gov/. Beginning January 2025, each person who is eligible to receive the benefit can access services and supports costing up to $36,500 to pay for a variety of long-term care services. This value will change over time.
The payroll tax rate is .0058, which means that someone earning $50,000/year would pay about $290 annually ($5.58/week). There is no cap on the taxable salary.
So in short, taxes will start to be collected in 2022, but no one will qualify for a benefit until 2025. The reason being that this will give the state some time to amass funds to pay out benefits.
To qualify for benefits, the employee needs to meet the contribution requirements and be a resident of Washington at the time the employee needs long-term care – if the employee retires and moves of state they will not be eligible for benefits.
Employer Obligations
For employers, the only thing they are required to do is to collect the payroll tax and remit to the Washington’s Employment Security Department (ESD) quarterly. There is no requirement to offer a group plan as an alternative to the state’s program. And currently, there is no notice requirement for employers. It is possible this could change, but at this time there is no requirement.
Employers will not be paying any share of the premium contributions. However, they do have the option to pay the premiums on their employees’ behalf. Collecting premiums will be done the same was as for Washington Paid Family and Medical Leave; the state is currently updating their reporting system so employers can report for both programs at the same time.
Opt-Out
There is an opt-out option for employees. Employees who have a qualifying long-term care insurance policy in place before November 1, 2021 can apply for an exemption. Long term care insurance, as defined under RCW 48.83.020, is insurance designed to provide coverage for at least 12 consecutive months for one or more necessary or medically necessary diagnostic, preventative, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital and includes any policy that provides the payment of benefits based on cognitive impairment or the loss of functional capacity.
If an employee is approved for an exemption, they are permanently disqualified from the state-run program. The timeframe for employees to submit an application for exemption is from October 1, 2021 until December 31, 2022.
Employers do not apply for an exemption, even if they offer a long-term care program. Employees have to decide whether to apply for an exemption. So, this means, even if the employer offers a compliant LTC program, employees will need decide if they will apply for the exemption during the October 1, 2021 through December 31, 2022 time period. If they do not apply for the exemption or receive approval, the payroll tax still needs to be collected.
Employees that receive an exemption need to present the approval letter to their employer; if they fail to, they will not receive a refund on withheld premiums. Employers will need to retain these exemptions approval letters.
Next Steps:
- Identify employees who primarily work in Washington and subject to the new tax;
- Assess LTC offering and communicate to employees the opt-out period if offering a compliant LTC program;
- Work with payroll to implement the 0.58% payroll deduction beginning on January, 1, 2022;
- Set up a process for collecting and maintaining employees’ exemption approval letters and relay exemptions to payroll;
- Determine how to communicate the program to employees; and
- Prepare to remit program assessments to ESD quarterly. The first remittance will be due April 30, 2022.