FAQ: New long-term care insurance program and payroll tax
How was the new long-term care insurance program and payroll tax established?
With no House Republican votes, the new long-term care insurance payroll tax was established by the passage of House Bill 1087 in the 2019 legislative session. House Bill 1087 created the Long-Term Care Services and Supports Program to provide individuals who have paid into the program for a specified period of time with a limited lifetime benefit (up to $36,500) to assist with future long-term care costs. To pay for the new program, the legislation created a new payroll tax – one of several tax increases passed by majority party Democrats since 2019. More information on this program and tax can be found at wacaresfund.wa.gov.
What House Republicans believe
- The new long-term care insurance program and payroll tax to pay for it should be repealed.
- If Democrats won’t repeal the new program and payroll tax, then workers should have to opt in and be allowed to opt out at any time.
- If Democrats won’t repeal the new program and payroll tax or change it to opt in, then significant reforms need to be made to the program.
Can workers opt out of the new long-term care insurance program and payroll tax?
Workers in Washington state age 18 years or older who have purchased qualified long-term care insurance plan before Nov. 1, 2021 can apply for an exemption to the new program and payroll tax. Once a plan is purchased, an individual must apply for an exemption from the program to the Employment Security Department (ESD) between Oct. 1, 2021, and Dec. 31, 2022. If ESD approves the exemption, the individual is permanently exempt from the payroll tax and ineligible for future coverage from the program.
Recent news and views
- Opponent of Washington's long-term care act targets tax with series of bills (Puget Sound Business Journal)
- Leading effort to repeal long-term care tax, Rep. Abbarno invites legislative Democrats to join (The Reflector)
- EDITORIAL: Safe Stay; rethink tax plan (The Columbian)
- Changes lawmakers are hoping to make to Washington's long term care tax (KING TV)
- Inslee offers support for temporary delay in new payroll tax for long-term care program (NW News Network)
What is long-term care insurance?
According to the Office of the Insurance Commissioner’s website: “Long-term care insurance helps with many medical, personal and social services for people with prolonged illnesses or disabilities. It can include home health care, adult day care, nursing home care and group living facility care.”
Long-term care insurance is defined in RCW 48.83.020.
How will this impact workers in Washington state?
Beginning Jan. 1, 2022, workers in Washington state will pay $0.58 per $100 of their earnings to fund the program. Those who pay into the program are eligible for a lifetime maximum benefit of $36,500 (adjusted annually by no more than the Consumer Price Index once they vest).
How long do workers have to pay into the program to receive benefits?
Vesting occurs when an individual who works a minimum of 500 hours per year pays premiums for at least ten years (without a break of five consecutive years) or for three of the previous six years from the date of application for benefits. Those who paid for ten years are permanently vested, while those who paid for three of the last six years from the date of application for benefits vest on a temporary basis and can un-vest if they no longer meet qualifications.
When can a vested individual use the benefits?
To utilize the benefits (paid in $100 stackable units), vested individuals must reside in Washington state and need assistance with a minimum of three of ten Activities of Daily Living: medication management, personal hygiene, eating, toileting, transferring, body care, bathing, ambulation/mobility, dressing, and cognitive impairment. Individuals who meet these requirements may begin applying for benefits in January 2025.
What services qualify for use by these funds?
The funds can only be utilized with providers who are on a Department of Social and Health Services approved list for services. Funds can be spent on nursing facilities, residential settings like assisted living and adult family homes, professional caregiving like home health care, wheelchair ramps, emergency alert devices, medication reminders, Meals on Wheels, rides to doctor appointments, dementia education, caregiver support, and care coordination. Family members may qualify to receive funds upon receiving 21 to 35 hours of formal training to care for beneficiaries. Learn more about applying for benefits here.
How does the tax impact self-employed individuals?
A self-employed individual can choose to opt into the program between January 2022 and January 1, 2025, or within three years of first becoming self-employed for the first time. Self-employed opt ins are irrevocable, and the payroll tax will apply as long as they are self-employed (and if they are later employed by a qualifying employer).
Does the tax impact current retirees?
The payroll tax is levied on an “individual in employment with an employer” as outlined in RCW 50B.04.080. Therefore, current retirees who have no income from an employer would not be subject to either the tax or the benefits. However, if a current retiree earns any income from an employer, he or she would pay the payroll tax on earnings and could potentially qualify for benefits in future years if eligibility criteria is met.
How does this impact individuals who live and work in different states?
Individuals who live in the state, but do not work in the state, will not be eligible for the benefits nor will they have to pay for this tax. Those who live in another state, but work in Washington, will have to pay the payroll tax but will not be eligible to receive the benefits of the program unless they later move into the state.
What is expected of employers?
Beginning Jan. 1, 2022, employers will collect premiums from employees the same way they do for Paid Leave. Employers won’t pay any share of the contributions for their employees. Information for employers can be found at this website, which include an employer toolkit. Employers can also contact ESD through this online form.
How can I learn more?
- WA Cares Fund
- Department of Social and Health Services | Long-Term Services and Supports (LTSS) Trust Act
- Department of Social and Health Services | Long-Term Services and Supports (LTSS) Trust Commission
- Employment Security Department Long-Term Services and Supports Rules
- Washington State Information Technology (IT) Project Dashboard | Project: ESD Long-Term Services and Supports Premiums
Note: The content of this web page should not be considered or construed as legal, financial or health care services advice from the House Republicans Caucus, including its members and staff. This content is meant to be informative, including the explanation of the legislation that created and changed the Long-Term Services and Supports Trust Program and how it impacts workers, retirees and employers in Washington state. This web page will be updated when new information on the Trust Program becomes available.