The state’s upcoming long-term care program, the WA Cares Fund, continues its march towards the January 1 implementation of the long-term care payroll tax. Employees can now apply for exemptions if they qualify. Additionally, the deadline for potential program opt outs for those that have alternative insurance is nearing its November 1 deadline.

Exemptions

To refresh readers, the 0.58% long-term care payroll tax applies to all employees working in Washington. As we wrote previously, the statute that created the WA Cares Fund allows current Washington employees a one-time opportunity to opt out of the WA Cares Fund program and the associated payroll tax. To do so, employees must:

1. Be at least 18 years old.
2. Purchase a qualifying private long-term care insurance plan before November 1, 2021.
3. Submit an exemption application to ESD between October 1, 2021 and December 31, 2022.

Under current law, exemptions from the WA Cares Fund are permanent. This means that once a person is exempted from the payroll tax, they are permanently barred from receiving benefits under the program. After an employee’s exemption is approved, it is up to the individual employee to inform their current and future employers that they are exempt from the payroll tax. No refunds will be issued if taxes are withheld due to an employee failing to inform their employer.

As many employees discovered this past summer, a large interest in seeking alternative plans effectively overwhelmed the normally slow-paced market for private long-term care insurance. The high volume prompted many companies to stop taking new applications in August. For those that were able to find an alternative private plan, the Employment Security Department (ESD) released its online exemption application form on October 1. Since the information required for an exemption application is minimal, ESD hopes to process applications relatively quickly, though this will of course depend on the volume of exemption applications submitted.

As stated above, employees have until the end of 2022 to file the exemption application with ESD, though they will be liable for some payroll tax premiums if their application is filed after the tax goes into effect. When the online application launched, it saw high traffic that crashed the site on the first day; website traffic volume continues to be high. ESD advises that employees looking to fill out the application either delay filling it out or try to log in during off-peak hours to avoid system delays and time outs.

Legislative action expected

The complications with the rollout, as well as some of the pre-existing critiques of the program, has prompted legislative leaders on both sides of the aisle to say they expect the Legislature to take up changes to the WA Cares Fund program in the 2022 session. Here are a few of the issues that may be addressed:

• Funding sustainability and solvency (which may include raising the current premiums cap);
• Exempting out-of-state workers or non-immigrant foreign workers from the tax (since only WA residents can qualify for benefits);
• The collapse of the private insurance market;
• Exempting or accommodating near retirees so they can fully vest in the program;
• Requirements for people to maintain alternative coverage to continue the tax exemption;
• Authorizing supplemental private plans to complement WA Cares Fund coverage; and
• Portability of benefits for people leaving the state after retirement.

AWC will continue to stay engaged and learn more about what issues are most likely to get legislative attention in 2022 as the session approaches.