Washington was the first state in the nation to develop a long-term care payroll tax to help fund a long-term care program. Known as the Washington Cares Fund, the program (RCW chapter 50B.04) will be funded with a 0.58 percent payroll tax on all employee wages, beginning July 1, 2023.
Employers must collect this assessment through after-tax payroll contributions and remit those premiums to the Washington State Employment Security Department (ESD). Employers are not required to contribute to the Program, but they must remit the employee-paid taxes.
About the Washington Cares Fund
Which Employees Are Taxed
Employees are treated as employed in Washington if the employee’s service is localized in the state or, if the service is not localized in any state, the employee performs some services in WA and the services are directed or controlled from Washington State. This definition is like the Washington Paid Family and Medical Leave Program.
No Cap On Taxed Wages
Unlike other state insurance programs, there is no cap on wages. All wages and other compensation, including stock-based compensation, bonuses, paid time off, and severance pay, are subject to the tax. For example, an employee with wages of $75,000 will pay $435 toward the Program each year while an employee with wages of $300,000 will pay $1,740 yearly toward the Program.
The Benefits Under the Program
Benefits under the Program will become available January 1, 2026. If eligible, and if the Department of Social and Health Services determines that an individual needs help with at least Three Activities of Daily Living, the Program pays benefits up to $100 day, with a lifetime limit of $36,500.
This is a small benefit considering the 2021 annual cost of care in Washington State was over $125, 000 for a private room in a nursing facility. Even a Home Health Aide for 44 hours a week costs almost $78,000 per year.
Costs from the 2021 Cost of Care Survey Genworth.com, site accessed 6/12/2023
Who Is Eligible to Receive Benefits?
Benefits are limited to Washington residents who have paid premiums under the Program for either:
A total of 10 years without interruption of five or more consecutive years; or
Three years within the last six years from the date the application for benefits is made. Also, to qualify, an employee must have worked at least 500 hours during each of the 10 years or each of three years, as applicable.
From a practical standpoint, this means that employees who plan to retire in the next 10 years have to pay premiums, but may never qualify for the benefits. And retirees who move out of state will not qualify for the benefits.
Exemptions To WA Cares Fund
Beginning Jan. 1, 2023, Washington workers became eligible for exemptions from WA Cares if any of the following apply to them:
Live outside of Washington.
Are the spouse or registered domestic partner of an active-duty service member of the United States armed forces.
Have a non-immigrant work visa.
Are a veteran with a 70% service-connected disability rating or higher will receive a permanent exemption.
Because benefits are limited to Washington residents, employees who move out of state will not be eligible to receive benefits under the Program. Employees who maintain a second home will want to consider which location will be their permanent residence.
Self-employed individuals are exempt from the Program but may choose to opt in. Under the Program, self-employed individuals must elect coverage by January 1, 2025, or within three years of becoming self-employed for the first time.
Other States Considering A Long-Term Care Tax
Following Washington State, several other states are now considering a long-term care tax.
Long-Term Care Planning
Private long-term care insurance can protect your assets and family. Find a plan that’s right for you with our highly rated companies, multiple plan options, and expert long-term care advisors.
Expect personalized service on topics such as:
✓ Choosing from a variety of long-term care insurance products
✓ Suggestions for the carrier best suited to your situation and goals