WA Cares Fund payroll tax to start July 1

The employee payroll tax used as premiums to fund Washington’s new long-term care benefit is set to begin July 1, after an 18-month delay. Cities should make sure that they are ready to collect the premiums from employees’ paychecks after that date. Employees with approved exemptions on file with their employer will not pay the premiums.

As the program prepares for this initial rollout, WA Cares Fund has released an employer toolkit to help employers prepare their employees. It includes a calendar of major program dates and milestones, a paycheck insert explaining the WA Cares Fund to employees, FAQs, and “long content” materials that can be used for staff mailing lists and updates.

Under the law, all employees not exempted from the program will pay a 0.58% payroll tax that will be deducted from their paychecks by their employers and later remitted to the state WA Cares Fund on a quarterly basis, much like the premiums for the Paid Family & Medical Leave program. Unlike the PFML program, employers are not required to pay a portion of the WA Cares Fund payroll tax, only collect the tax from employee paychecks and remit them to the state. Eligible employees will be entitled to a lifetime maximum benefit of $36,500 to use for long-term care services. Employees must pay at least 10 years' worth of payroll taxes, be at least age 18, and be a current resident of Washington to be eligible for benefits.

To be exempted from the payroll tax starting in July, most employees must have already had alternative insurance and applied for an exemption with the Employment Security Department by December 31, 2022. Those employees need to present their ESD exemption letter to their employer prior to July 1 to avoid the first collections of the tax. Current law does not require exempted employees to maintain their alternative coverage after they have been approved for an exemption, but the WA Cares Fund advisory commission has recommended to the legislature that they change the law to require regular recertification of ongoing coverage.

No new generally available exemption process has since been adopted. The only exemptions that now exist only apply to out-of-state residents, non-immigrant temporary workers, spouses of active-duty military, or veterans with a service-connected disability.

Controversy surrounded the initial rollout of the program as the state geared up for the original January 2022 start of the payroll tax. The WA Cares Fund program faced questions about long-term solvency, adequacy of benefits, unfairness in premiums assessments, and public frustration over a rushed and confusing opt-out process that crashed the private long-term care insurance market. Because of this, the legislature pressed pause on the program and added several exemptions to the program in the 2022 session, bumping out the implementation of the payroll tax to July 1 of this year, with the first round of benefits eligible to be paid out in 2025.

It was originally anticipated that the legislature may address other lingering issues with the program ahead of the delayed rollout of the program, but the legislature took no action on the WA Cares Fund in 2023.