Payroll Tax for Long-Term Care Program Starts July 1

information released

Dear Friends and Neighbors: The WA Cares Fund, a new state-run, long-term care insurance program, will begin payroll deductions on July 1. Originally set to take effect in January 2022, the Legislature voted to delay the payroll tax by 18 months. For those eligible, WA Cares provides up to $36,500 for nursing care and other services.

The cost: Most workers in Washington, including part-time and temporary workers, will pay up to 58 cents on every $100 of their earnings for this new program. That means, for example, someone making $50,000 per year the new tax will pay $24.17 monthly or $290 yearly.

• Use this calculator to determine how much will be deducted from your paycheck.
• Click here to learn more about the WA Cares program.

Background: In 2019, the Long-Term Care Act, House Bill 1087, was approved by the majority party and signed into law by the governor. Republicans voted “no” on this measure for several reasons, including its deep unpopularity with voters.

• Nearly 63% of Washington voters said the long-term care payroll tax should be repealed with Advisory Vote No. 20 in 2019.

What about exemptions? Two deadlines in 2021 and 2022 — set in state law — were offered for those looking to opt out of the program. If you purchased a qualifying long-term care insurance plan by November 1, 2021, and applied for a permanent exemption from the WA Cares Fund, you are not subject to the new payroll tax.

• The deadline for applying for this exemption was December 31, 2022.
• Although some people could take advantage of this exemption, many others couldn’t find a private plan in time, and countless others simply didn’t know about the new payroll tax.
• The Long-Term Services and Supports Trust Commission makes recommendations regarding criteria for determining who is a qualified individual, minimum provider qualifications, service payment maximums, actions needed to maintain Trust solvency and monitoring of agency expenses.
• Click here to learn more or attend meetings.

Beyond the private insurance exemption, there are a few — very limited — exemptions that exist in state law:

• Live outside of Washington state.
• Are the spouse or registered domestic partner of an active-duty service member of the U.S. armed forces.
• Have non-immigrant work visas.
• Are veterans with a 70% service-connected disability rating or higher.
• Learn more about exemptions here.

More on the Long-Term Care Act

When the program was originally debated, members of my caucus repeatedly offered amendments to further open exemptions for those unable to meet the deadlines listed above, which were rejected by the majority party. If denied an exemption, this program will force those who want nothing to do with it to pay the payroll tax. It’s unfair to lock Washingtonians into a state-run program with no further options.

As a legislator, I understand the Washington State Long-Term Care Act aims to provide a public long-term care insurance program to residents. However, I have several concerns about the viability and effectiveness of the program.

First, the Long-Term Care Act imposes a state mandatory payroll tax for current and future workers, without exemptions, including those who may not require long-term care in the future or already have private long-term care insurance. This approach places an additional burden on individuals, especially low-income workers, who may struggle to afford the tax.

Second, the benefits provided by the Long-Term Care Act are extremely limited and may not adequately cover the costs associated with long-term care services. The maximum benefit of $36,500 is wholly inadequate and may give a false sense of security about future long-term needs. This could leave individuals and families with significant out-of-pocket expenses, defeating the purpose of having long-term care insurance in the first place.

Additionally, the Long-Term Care Act does not provide flexibility for individuals to choose their preferred long-term care services or providers. It establishes a one-size-fits-all approach, limiting the freedom of choice for residents. This lack of flexibility may not align with the unique needs and preferences of individuals and their families, leading to problems with the quality and type of care received.

And finally, and most importantly, the implementation of the Long-Term Care Act raises serious concerns about the sustainability and financial viability of the program. The act’s funding mechanism relies solely on payroll taxes, which may not be sufficient to sustain the program in the long run. This could result in increased taxes or reduced benefits in the future, further burdening taxpayers and undermining the effectiveness of the program.

I hope you found this information helpful

In the coming session, I expect several more efforts to amend this program. Some additional resources and links to information on the program are attached below. As always, if you need any further information not provided in this update, contact my office. I’m happy to help.

• What to know about WA Cares payroll tax as premiums are set to resume (Seattle Times)
• Washington Cares Fund goes into effect on July 1. Here’s what to know (The Olympian)
• Washington’s long-term care program still flawed as new tax looms (Kitsap Sun)
• WA Cares called insolvent, unfair, unnecessary by local think tank (Center Square)

It’s an honor to serve you!

Sincerely,

Mike Steele