The Long-Term Care Trust Act will become effective on January 1, 2022. This means that starting in January, all Washington State employees will be subject to a 0.58% payroll tax. Employers will be responsible for collecting the tax through payroll deductions.
This tax will fund a state LTC insurance program. LTC is for individuals who need help completing daily activities such as dressing, bathing, eating, taking medication, etc. The program provides benefits with a lifetime limit of $36,500.
The benefits will become available on January 1, 2025. To receive benefits, individuals must:
- Be a WA state resident.
- At least 18 years old
- Need assistance with at least three daily activities
- Must have worked a minimum of 500 hours per year and paid the tax for either 3 years within the past 6 years or 10 years with at least 5 of those years consecutively
These benefits are not portable. If you leave Washington state, you forfeit the benefits.
Individuals who have private LTC insurance (must be purchased before November 1, 2021) can apply to opt-out permanently. The employment security department will accept opting out applications between October 1 – December 31, 2021. Employees who opt out will receive an approval letter from ESD. Employees must provide a copy of the approved letter to their current and all future employers.
Self-employed individuals are not subject to this new tax but can choose to opt into the program. They must elect to opt-in by January 1, 2025, or within three years of becoming self-employed for the first time.
Employers should tell their employees about the new payroll tax and the option to opt-out if they have their own private LTC insurance. Employers may also consider providing their employees with an LTC insurance option. For the insurance to qualify, the plan must be equal to or better than the state plan.
Individuals who may want to opt-out include those who are:
- Planning to retire out of state since the benefits are not portable
- Planning to retire in the next ten years, as they may pay in but not qualify to receive benefits
- High-income earners who can purchase an LTC plan for less than the payroll tax premium
- Employees who are newer to the workforce, since they may pay more in tax than they would receive in benefit
For additional information about the LTC insurance program as it relates to business owners, visit http://www.wacaresfund.wa.gov/employers