Links Updates 09/01/2021
Stay updated on future rules concerning the New Washington State Long-Term Care Act, visit https://esd.wa.gov/newsroom/rulemaking/ltss .
Rules about what qualifies for exemption when looking for private insurance: https://www.insurance.wa.gov/what-qualifies-long-term-care-insurance
WHAT IS THE WA CARES FUND?
For those unfamiliar with the fund, the Long-Term Care Act was signed into law by Governor Jay Inslee following the approval of the House and Senate. It was created with the intention of reducing the pressure on the Medicaid system and will be paid for by a .58% tax on employee wages, withdrawn and remitted by their employer(s) as a regular payroll tax. The tax is permanent and applies to all Washington State employees and there is no cap to the amount you will pay throughout the course of your employment.
Beginning January 1, 2025, qualified employees, those who have paid premiums into the program for 10 years without interruption for five of those years, or paid premiums for three of the last six years from the date of the application of benefits and worked at minimum 500 hours during each of the 10- or 3-year time-frames, are eligible to receive benefits. These benefits include $100 per day up to a lifetime maximum of $36,000 (adjusted annually) and include services such as nursing facilities, assisted living or adult family homes, home healthcare, wheelchair ramps, emergency alert devices, Meals on Wheels, transportation support, caregiver support, and memory care.
To receive benefits, you must apply through the Department of Social and Health Services and show that you require assistance with at least three activities of daily living.
In addition to the parameters above, those who are eligible to receive the benefits must be residents of Washington State, which means that, although they are required to pay the tax, residents of Oregon or Idaho are not eligible.
OTHER THINGS TO CONSIDER
The WA Cares Fund is a progressive tax that is meant to benefit low-income earners the most. However, due to the daily and lifetime limits is unlikely to cover a significant amount of the expenses that may be incurred with needed services.
Rates may increase as the law sets the tax rate at 0.58% initially, then at a rate “no higher than 0.58%” as of Jan 1st, 2024 and resets every 2 years thereafter. While the rate returns to 0.58% (or lower) each Jan 1st of even-numbered years, it can rise (and may have to) during the 24-month period between “resets”.
There are things that the fund does not provide. For instance, it is not portable to other states or outside of the United States for use. Coverage is personal and cannot be transferred to partners, spouses, or other family members and, in that respect, is also not payable upon death if you do not use it. The premium is not refundable, so if you move out of Washington State, you do not receive what you paid into the fund back.
Limited exceptions to paying the tax include:
- Self-employed individuals (unless they elect otherwise);
- Employees of federal tribes (unless the tribe elects otherwise) or the federal government;
- Employees subject to a collective bargaining agreement in existence as of October 19, 2017, unless and until such agreement is reopened, renegotiated, or expired.
The legislation provides a one-time window to opt out of this tax and waive the right to receive benefits under the public long-term care program by demonstrating that you have obtained qualifying private long-term care insurance (as currently defined by the state in RCW 48.83.020.) before November 1, 2021. The insurance you enroll in must have benefits that are equal to or greater than those offered by the state program.
In order to receive exemption, you must purchase your insurance before November 1, 2021, provide identification to verify your age, and must apply for exemption with the Employment Security Department (ESD) between October 1, 2021 and December 31, 2022. If approved, your exemption will be effective for the quarter immediately following approval. Once an employee opts out, the employee cannot opt back into the Program. The opt-out is permanent.
After your application for exemption is processed and approved, you will receive a letter of approval from ESD. You must provide this letter to your employer and they are required to keep a copy on file. Failure to provide this means your employer is obligated to collect and remit payments for the premiums beginning January 1, 2022 and you will not be entitled to a refund of premiums collected after your exemption took effect but before you provided the letter.
WHY YOU MAY WANT TO OPT OUT
There are several reasons you may decide to purchase your own Long Term Care Insurance and opt out of paying into the WA Cares Fund. Higher-income employees may find they can find they pay lower premiums than the tax payments would be and receive better flexibility in purchasing a private plan. Employees who are new to the workforce and expect that they will pay more into the premiums than they would receive in benefits may also find that it makes more sense in the long-run to forgo the tax.
Planning to opt-out may also make sense when you are planning your retirement as the limitations may prevent you from using the benefits of the fund. If you are planning on retiring before you would be eligible, or planning on moving out of state when you retire, a private Long-Term Insurance plan makes more sense as they allow both the timing and the flexibility limited by the WA Cares Fund.
Lastly, even though the self-employed are automatically exempt, if you are currently self-employed and expect to change careers and work for another company as a W-2 employee, you may want to purchase your own insurance rather than be subject to the tax when you change jobs.