A new Washington state payroll tax goes into effect on January 1, 2022, and most people are not aware of it. On May 13, 2019, Governor Jay Inslee signed into law the creation of the nation’s first public state-operated Long Term Care (LTC) insurance program now known as the WA Cares Fund. The new law establishes a trust funded by a .58% payroll tax on all W-2 employee wages. Now is the time for companies to communicate to employees about the upcoming payroll tax and how they could get an exemption from this tax.
Why was this law put in place?
- 7 out of 10 people will need LTC at some point in their lifetime
- More than 90% of people do not have LTC insurance
- The current average cost of a single-room Assisted Living Center in Washington is $5376/month
- The current average cost of a single-room Skilled Nursing Facility in Washington is 11,695/month
- Medicare generally does not pay for LTC. It will pay for nursing facilities for the following:
- Days 1-20 Covered
- Days 21-100 Co-payment Required
- Days 100+ Not Covered
- To qualify for Medicaid benefits, Individuals must only have $2000 in assets available
- All other costs are paid out-of-pocket
How do you qualify for benefits?
To qualify for benefits from the WA Cares Fund, one must have worked and contributed to the fund for:
- At least ten years at any point in your life without a break of five or more years within those ten years, or
- Three of the last six years at the time you apply for the benefit and worked at least 500 hours per year during those years.
People who have a need for long-term services and support may begin applying for benefits in January 2025. You must stay a resident of Washington State to qualify for Fund benefits. If the primary residence is outside of WA for five years or more, one forfeits all benefits and taxes paid.
How much can an Eligible Entity receive?
An entity can receive a tax-free federal grant equal to the amount of its pandemic-related revenue loss, less the total amount it received in all PPP loans.
Aggregate grants made to an eligible entity, and any affiliated businesses of the eligible entity, are limited to $5M per physical location and $10M total for the eligible entity.
What benefits are available?
The WA Cares Fund pays a maximum lifetime benefit of $36,500. To be eligible to receive benefits, one must need assistance with at least three activities of daily living, such as:
- Medication management
- Personal hygiene
- Cognitive functioning
- Transfer assistance
- Body care
What services and support are available through the WA Cares Fund?
The benefit is available for services and supports, such as:
- Professional personal care in your home, an assisted living facility, an adult family home, or a nursing home
- Adaptive equipment and technology like hearing devices and medication reminder devices
- Home safety evaluations
- Training and support for paid and unpaid family members who provide care
- Home-delivered meals
- Care transition coordination
- Memory care
- Environmental modifications like wheelchair ramps
- Personal emergency response system
- Respite for family caregivers
- Dementia supports
- Education and consultation
This benefit can only be used at a Washington state residence or facility.
Who must pay into the WA Cares Fund?
The new payroll tax is levied on W-2 income only. Self-employed people do not get taxed but can opt into the program. W-2 income can include wages, commission, tips, bonuses, and more.
Employees are charged at a rate of 58 cents per $100 in income. Someone with $100,000 in W-2 income during 2022 would pay $580 more in payroll taxes. There is no cap on the tax of 0.58%. This rate can increase with approval from the Washington Legislature.
How does one opt out of the WA Cares Fund and payroll tax?
Some employees may choose to apply for an exemption. To qualify for an exemption, a person must be at least 18 years old and purchase a private long term care insurance plan. The LTC insurance plan must be in place, including underwriting, prior to November 1, 2021. If approved for the exemption, it is the responsibility of the employee to notify their employer. They must provide a copy of the approval letter from the WA Employment Security Division (ESD). People can start applying for the Exemptions on October 1, 2021. Exemptions are permanent and employees may never opt back in, even if they change jobs.
Because of this November 1, 2021 deadline, it is important to notify employees of the upcoming payroll deduction, let them know how they can apply for the exemption, and the deadline.
ESD has rolled out a brand new program website that has useful information, including FAQs about the new WA State Long-Term Care Plan.
*This information simplifies complex Acts as it is understood by Time Equipment Company. It is not to be taken as legal advice. The regulations for this program are changing. For further information about the WA Cares Fund, please visit www.wacaresfund.wa.gov.