WA State Long Term Care Insurance & Tax

WA State Long Term Care Trust Act

−Washington State enacts first public long term care insurance program resulting in new tax for all WA State W2 Employees

WA State Long Term Care Trust Act

What is Long Term Care insurance?

Long-term care is a service intended to address an individual’s health or personal requirements, offering support in performing daily activities, including but not limited to eating, bathing, dressing, and more.

What We Know About the Law

  • The program is funded through employee payroll tax
  • All W2 employees will pay 0.58% payroll tax on all wages and compensation
  • Tax rate is set until 1/1/2024 and is reviewed every 2 years to adjust accordingly
  • Once vested, the benefit is up to $100/day up to $36,500/lifetime and can be adjusted for inflation
  • LTC benefits are only available to employees in the state of Washington and are not transferable
    Those who possess private long-term care insurance can choose to forgo the program by seeking an exemption through their employer. As of now, the criteria and regulations for obtaining an exemption are in the process of being established.

When Does the Tax Begin?

  • The tax will be collected beginning January 1, 2022, unless the employee has opted out
  • The deadline for employees to opt-out for the new LTC payroll tax is November 1st, 2021
  • Benefits become available to employees and retirees starting in 2025

Who it Impacts

  • All W-2 Employees in Washington will have to pay the tax
  • The tax will be optional for workers who are self-employed
  • Residents that move out of state for longer than five years will forfeit benefits and premiums
  • Those who are currently retired do not pay premiums and do not qualify for benefits

How it works

  • Workers contribute to a tax that is managed by a trust fund, which then invests and disburses the funds once employees become vested and meet the qualifying criteria.
  • Vesting period for benefits is who paid the tax for either:

– Three of the past six years or

– Ten years without a break of five or more years

  • Care providers must be listed on a Department of Social and Health Services approved list
  • To qualify, once vested, residents must require assistance with three Activities of Daily Living (ADLs),* which include the following:
WA State Long Term Care Trust Act

Opt-Out for Individuals – What you need to know

  • The Act allows individuals to opt out of the program if they are self employed or have an LTC plan that is equal or better than the state’s policy
  • An LTC Policy or Life Insurance Policy with an LTC rider can satisfy requirements to opt out
  • Life Insurance with Long Term Care Riders must meet 7702B(b) criteria
  • LTC coverage must be owned or purchased before November 1st, 2021 to opt out
  • Once the “opt-out” period has passed, there will be no way to opt out of tax

For more information on this topic, visit this source for more insight on the Long Term Care Trust Act.

Long Term care is a great benefit, but the WA State Long Term Care Fund may not meet everyone’s specific needs. To have one of our licensed agents review your options to see what is best for you and your family please fill out a long term care quote form below or give us a call.

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