Dear Clients and Friends -
On June of 2019, Governor Inslee signed the Long-Term Services and Support Trust Act into law. It has since been renamed the “Washington Cares Fund”, but its purpose is unchanged: to create the first in the nation publicly operated long-term care insurance program.
The program will be funded by a payroll tax on all compensation of employees in the state of Washington, to be assessed starting January 1, 2022, through mandatory wage withholding. There is a one-time window to qualify, permanently opt-out of the program, or to be exempted from the program.
The Washington Cares Fund provides long-term care benefits of $100/day with a maximum lifetime benefit of $36,500. The program will be funded with a new payroll tax of 0.58% on the wages of all employees, however employers are not required to pay into the program. Self-employed individuals, business owners not receiving wages, are exempt from the tax by default, however there is a window to opt into the program, beginning January 2022.
To receive benefits under this new program, one must meet several requirements:
•Unable to perform 3 of 10 activities of daily living (ADL)
•Reside in the state of Washington at the time of the claim
•Paid the tax for at least 10 years (with no more than a 5-year break), or for at least 3 of the last 6 years immediately preceding filing for benefits.
You can permanently opt out of this program (and avoid the payroll tax), so long as you have your own long-term care (LTC) policy in place before November 1, 2021, and your policy provides benefits equal to or better than the new program. Depending on one’s wage income, it will nearly always make sense to opt-out and obtain your own policy, if possible, due to limitations of the new program such as these:
•Benefits are only available if unable to perform 3 of 10 ADLs (most policies are 2 of 6 ADLs) •Benefits are not portable (cannot be used outside of Washington state).
•Benefits are not LTC partnership qualified (in brief, partnership programs help protect assets from Medicaid’s asset recovery program).
•Benefits are likely more expensive for many people, due to the fact that there’s no wage cap on the tax.
For our clients who are employees, and/or owner/employees, especially higher wage employees without a current LTC policy, we strongly suggest you contact your insurance broker or investment advisor to inquire as to the cost of obtaining a private LTC policy of at least comparable coverage, so you’ll be eligible to consider opting out of the program by the October 31, 2021 deadline.
For our business clients who we provide payroll services for you can be assured that we will be ready to implement this additional withholding tax and related reporting at the start of the new year, for you and/or your employees, if not eligible to opt out of the program.
Please let us know if you have any questions, and/or would like to discuss your options further, as you consider whether to be part of the new LTC program, or instead will choose to opt out of it.
Our Best, Mike, Heather, Kristy, Maria, and Victoria