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What You Need to Know About the Washington Cares Fund LTC Act

Updated: Jun 2, 2021

TL;DR – Key Takeaways

  • 0.58% payroll tax begins 1/1/22 for all Washington state W2 employees 18+

  • Self-employed are NOT included and there is no tax cap

  • WA Cares Act can ultimately pay up to $36,500 for long-term care services/support TOTAL

  • Benefits are only paid out to WA residents and begin January 2025

  • Those with private LTCi (before 11/1/21) can opt out starting 10/1/21

What is it and when does it begin?

The Washington Cares Fund is the first publicly funded program that will provide a basic level of long-term care benefits to eligible people in the state of Washington.

An eligible person can receive a benefit of up to $36,500 TOTAL (adjusted annually) for long-term care services and support. Benefit payments will not begin until January of 2025 and there is a working/contributing vesting requirement to become eligible. Benefits from this program are only available if residing in Washington.

How is it funded and how much does it cost?

Beginning January 1, 2022, Washington state W2 employees aged 18 or older will be paying 0.58% of their payroll deductions toward the program. Self-employed people are NOT included but may choose to opt into the program.

The cost is 0.58% of a person’s wages and there is no cap. For example, an employee making $100,000/year will be taxed $580 each year. An employee making $500,000/year will be taxed $2,900. And so on.

What if I already own private long-term care insurance?

Workers who have private long-term care insurance prior to November 1, 2021 can opt out to not pay the tax but there is a TIME WINDOW for opting out (October 1, 2021 through December 31, 2022). We will let you know as soon as you can apply for an exemption.

Our comments on the Act:

Reach out to your Washington State clients about this—especially if they have a high net worth. Doing the math on Russell Wilson’s bill, he is set to pay $120k per year to secure a lifetime benefit of $36k. This supports the belief that this is a disguised income tax.

There are a lot of parallels with the California State Disability Insurance program (reminder: only four states in the United States have SDI programs). The bill could make the long-term care conversation more challenging, as we now have to disentangle preconceived notions about the state benefit, just like how CASDI impinges on the private DI marketplace for W2 wage earners. Most W2 wage earners are content with a one-year benefit up to $5,000/month, which is a false sense of security as we know many people don’t have the resources to cover their livelihoods for the duration of a prolonged illness or injury.

But just as with CASDI, there’s a greater market for higher-income earners and self-employed professionals who want more than the one year of LTC protection that this WASLTC plan offers. We have been able to find much more robust solutions for people using the same premium figure that they are about to be charged for this comparatively tiny $36,500 benefit. Our mission is to help as many people as possible obtain adequate private LTC coverage before the opt-out period because everyone is locked into this tax after that.

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