Updated April 12, 2021
WA STATE LTC PAYROLL TAX / DEADLINE for EXEMPTION OPTION
What Employers and W-2 Employees Need to Know About the Limited Time Exemption Option
Planning to apply for a LTC payroll tax exemption?
A payroll tax exemption application requires a qualifying LTC policy that was issued and in-force
before November 1, 2021.
SEE FAQ BELOW FOR DETAILS
- A premium tax of $0.58 for each $100 earned will be collected through payroll deduction beginning January 1, 2022. Wages will be taxed without limitation or capped amount.
- Individuals with private qualified long-term care insurance may opt out of the program by applying for an exemption between October 1, 2021, and December 31, 2022. To opt out of program, individuals must acquire private qualified long-term care insurance before November 1, 2021.
- There is an option for self-employed individuals to elect coverage and be part of the program.
- Note that employers are not required to make contributions.
- Benefits become available to employees and retirees starting in 2025.
- Individuals not residing in Washington will not receive benefits, even if vested in the program.
- WA LTC Trust Vesting period for benefits: 3 of the past 6 years or 10 years without a break of 5 or more years (must have worked at least 500 hours per year).
Talk to an LTC Specialist
If you would like to discuss options for private LTC coverage that would qualify for the LTC payroll tax exemption, please complete the form below and a Pillar Benefits Specialist will get back to you within 2 business days. If you plan to apply for an exemption, please note that the process for acquiring a private tax-qualified LTC insurance should begin as soon as possible.
Our LTC Specialists
November 1, 2021
Private LTC insurance policies must be issued and in force to be eligible for exemption before this date.
October 1 – December 31, 2022
Time period to apply for payroll tax deduction exemption with employer.
January 1, 2022
Employers begin deducting WA state LTC payroll tax.
State plan benefits become available to employees and retirees.
FAQ for Employers and Employees
(click on question for details)
LTC Payroll Tax Background
In 2019, Washington State Gov. Inslee signed into law the Long Term Care Services and Supports Act (LTC Trust Act). This program will establish a state-funded long term care insurance for qualifying Washington state residents.(Legislative Bill SHB 1323 Summary and Updates)
The LTC Trust Program will be funded by a mandatory payroll tax for Washington residents who are W-2 employees working least 500 hours a year.
Beginning January 1, 2022, a premium assessment of $0.58 for each $100 earned must be collected through a payroll deduction. Wages subject to the tax are not capped.
For example, if you make:
- $30,000 per year, your payroll tax will be $174
- $300,000 per year, your payroll tax will be $1,740
- $3,000,000 per year, your payroll tax will be $17,400
The state LTC policy will pay a maximum of $36,500 at $100 per day if you require assistance with specified daily living activities. The state plan benefit duration is one year. It will be adjusted for inflation annually.
To qualify for state LTC plan benefits, a person must:
- be least 18 years old,
- have paid the payroll tax premium for 3 years OR
- have paid the payroll tax premium within the last 6 years, or for a total of 10 years, with at least 5 of those years paid without interruption (must have worked at least 500 hours per year), and
- live in WA state.
- Persons who have not paid into the program will not receive benefits.
- Individuals not residing in Washington state will be ineligible to receive benefits, even if vested in the program. Premiums will not be refunded.
Benefits will become available starting in 2025.
If you wish to opt out of the state plan and not pay the payroll tax, the amended legislation provides for an exemption. The exemption application requires that Washington state W-2 employees demonstrate that they own a qualifying long term care insurance policy that was issued and in-force before November 1, 2021.
Under normal circumstances, it can take 6-10 weeks to complete the application and underwriting process for a typical LTC policy. Due to demand, it is reasonable to expect more than the normal time to issue will be required. We advise that applications for the LTC policies should be submitted ASAP.
Price depends on age, sex, and the amount of coverage and type of qualifying LTC policy. Often, a private LTC policy will offer superior benefits at lower cost than the state option.
Employers will be required to deduct the payroll tax premium starting January 1, 2022 or provide assurance that their W-2 employees possess a qualifying LTC policy that was issued and in-force before November 1, 2021.
Employers can choose how to engage on this issue. They can:
- Leave it up to employees to get information and make decisions.
- Provide information to employees about the law and the exemption.
- Provide information to employees about the law, the exemption and direct them to qualified agents.
- Provide information to employees about the law, the exemption and offer a basic qualifying insurance option that can be put in place before November 1, 2021. (Exemption requires a qualifying LTC policy that was issued and in-force before this date.)
- Provide information to employees about the law, the exemption and qualifying insurance options that can be tailored to each employee’s actual situation and income tax and put in place before November 1, 2021. (Exemption requires a qualifying LTC policy that was issued and in-force before this date.)
Many employers will find that a COMBINATION of options 4 and 5 offers the best balance between what should be done and what can be done.
There are very few options for qualifying employer sponsored LTC coverage that don’t require significant agent support.
Most benefits consulting firms cannot provide the services, systems and licensed personnel required to properly execute the LTC program that will qualify within exemption period. Pillar International Insurance Advisors has the depth and breadth of experience and personnel to manage this process.