Update (Jan. 28, 2022)
The long-term care insurance tax has been delayed through 2022 while lawmakers “make refinements to the bill,” to quote Gov. Jay Inslee. For more information, https://mynorthwest.com/3286162/gov-inslee-delays-long-term-care-tax-through-2022/.
Washington has become the first state in the nation to establish an insurance benefit for long-term care. In 2019, the Washington Legislature passed the Long-Term Services and Supports Trust Act (House Bill 1087) to establish a special fund to help seniors pay for long-term care.
The WA Cares Fund, as it is called, is supported by a payroll tax — similar to the tax collected for social security — that will be deducted from workers’ paychecks starting in 2022. For those who qualify, benefits begin in 2025.
If you have (or sign up for) private long-term care insurance, there is a way to opt out. More on that later.
Why the WA Cares Fund?
According to the state Department of Social and Health Services, seven in 10 people in Washington will need long-term care at some point in life. The number of people 80 or older (the age group most likely to need care) is increasing more quickly than the number of people in their prime caregiving years (45–64). Today, there are seven potential caregivers for each older adult. However, if the older population continues to outpace the younger, it’s estimated that by 2030, the number of potential caregivers for each older adult will shrink to four (and to three by 2040). If the expected lack of caregivers comes to fruition, older adults would likely need more assistance from the state, whether they are able to live at home or in a long-term care center.
Under the new plan, the maximum lifetime benefit per person is $36,500. Those who need more coverage also can supplement with private insurance. The benefit can be used for skilled nursing facilities such as Christian Health Care Center, professional in-home care or for paying family members to provide care. The money also can be used for rides to the doctor, home-delivered meals and similar needs.
What this means for workers
The new payroll tax will be 0.58% of wages, meaning that a worker earning $50,000 per year will pay $290 annually, or $24.17 each month. As with social security, the idea is that workers pay into the trust while they are working and receive the benefits when they get older and need long-term care. Every employee must contribute to the fund, but employers do not pay into it. Those who are self-employed can choose to opt in starting in January 2022.
To be eligible for the benefit, workers will need to pay into the fund for at least 10 years in total without taking five or more consecutive years off. If they haven’t worked for that long, people can still qualify by having contributed for at least three of the last six years before claiming the benefit. In contributing years, workers need to log at least 500 hours.
Employees who contribute for 10-plus years are fully vested and can take the benefits even 10 or 20 years later.
However, those who haven’t paid in for 10 years can get the benefits only if they’ve contributed for three of the previous six years. In other words, if you retire after paying in for just three years, you could take the benefits within three years, but after that you would not be eligible.
The coverage is valid only in Washington state, so it couldn’t be used for long-term care or support elsewhere in the U.S. or around the world. For example, coverage will not be available if someone relocates for work or retires outside the state of Washington.
How to opt out of the WA Cares Fund
Though paying into the fund is automatic for all workers, there is a way to opt out.
To opt out of paying into WA Cares Fund, workers must apply for an exemption by Dec. 31, 2022, according to the Employment Security Department’s proposed rules. People wanting to opt out also must be older than 18 and have private long-term care insurance in place before Nov. 1, 2021. Opting out is permanent, so consider carefully; there is no way to opt back in to the plan.
After opting out, you must notify your current employer (and all future employers) so that deductions aren’t taken from your paycheck.
One benefit of opting for private long-term care insurance instead of paying into the WA Cares Fund is that the benefits might be transferable, should you move out of the state. The state Office of the Insurance Commissioner has a webpage that explains more about private long-term care insurance, including a list of companies approved to sell in Washington state.