The Long-Term Care Act, passed in May of 2019, mandates a new uncapped 0.58% payroll tax on employee wages. The tax will create a Long-Term Care Trust Fund to fund the Long-Term Services and Support Trust Program. The program will help supplement long-term care costs, such as assisted living expenses. While the program’s specifics are still changing, the final bill is still expected to be signed by the Governor shortly, and implementation of the tax will start on January 1, 2022.
Employers need to stay knowledgeable and updated on the Long-Term Care Act to ensure they comply with the tax deductions and can answer employee questions.
Employer and Employee Responsibilities
While employers are not required to contribute to the program, they are responsible for collecting the tax by withholding 0.58% of employee wages and remitting the premiums to the Washington Employment Security Department. All employees employed in Washington are required to pay taxes into the program. Employees who are subject to a collective bargaining agreement in existence on October 19, 2017, are exempt from the program, but only until the agreement is reopened and renegotiated or expires.
Eligibility and Benefits
Starting in 2025, eligible individuals will be able to receive benefits covering up to $100 per day per beneficiary for up to 365 days, with a lifetime cap of $36,500 adjusted to the Washington Consumer Price Index.
To be eligible for coverage, beneficiaries must be Washington state residents and unable to perform at least 3 out of 10 Activities of Daily Living. There are no benefits to individuals who retire out of state. Individuals who are covered by the Long-Term Care Act will vest (or be eligible to receive benefits) after they have paid into the program for either:
- 3 years within the last 6 years (“temporary vesting”)
- At least 10 years with at least 5 being consecutive (“permanent vesting”)
In both scenarios, individuals must also have worked at least 500 hours during each of the 3 or 10 years to qualify for benefits. Benefits will be paid to either specified care providers (such as nursing facilities, assisted living and adult family homes, etc.) or family members of beneficiaries who receive 21-35 hours of formal training.
The following groups are not automatically included in the program, but may opt-in by January 1, 2025, or within 3 years of becoming self-employed for the first time:
- Sole proprietors, including independent contractors
- Joint venturers or members of a partnership or LLC
- Members of a federally recognized tribe, who can opt-out at any time
Except for members of a federally recognized tribe, the opt-in election will be irrevocable. Procedures to opt-in are still being decided.
The Long-Term Care Act also grandfathers in certain employees who already have similar insurance policies. Employees who can verify that they purchased long-term care insurance before November 1, 2021, can opt-out of the program. Employees must also be at least 18 years old on the date they apply for the exemption to be eligible for this opt-out option. To opt-out, employees must apply for exemption between October 1, 2021, and December 31, 2022. If the employee’s opt-out election is approved, they will receive a letter from the Washington State Employment Security Department. The employee will then have to provide the approval letter to their employer. Once made, the opt-out election is irrevocable.
Who is Likely to Opt-Out?
Those who are likely to retire within ten years won’t qualify for the Long-Term Care Program and may seek out their own policy. Younger employees may feel the need to opt-out because their contributions and ability to use the program will not follow them if they decide to move out of state. There is also the issue of if the lifetime cap of $36,500 (adjusted to the Washington Consumer Price Index) can sustain someone in the Seattle area. For business owners and high-wage employees, they may opt-out because the tax does not have a cap. Those employees would be contributing more than lower-paid employees, and they may be better off buying their own, cheaper, or better, policy.
What should employers be aware of for the Long-Term Care Act?
Given that the Long-Term Care Act is still an evolving piece of legislation, employers should remain alert for any new updates and responsibilities that may arise in the near future. At Equinox, our corporate counsel team can help you stay on top of ever-changing employment law requirements. Contact us today at 425-250-0205 or firstname.lastname@example.org to get started.
Legal Disclaimer: This article contains general information. Do not view this article as legal advice. Talk with counsel familiar with your unique business needs before taking or refraining from any action.