Updated August 2021
We are unable to accept and/or service new applications for Washington state private long term care insurance
Planning to apply for an exemption from WA Cares LTC payroll tax?
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 long-term care insurance may opt out of the program by applying for an exemption between October 1, 2021, and December 31, 2022. To qualify for an exemption from this program, individuals must have or acquire private qualified long term care insurance before November 1, 2021.
- As of May 4, 2021, long term care insurance that is eligible for an exemption generally includes the following: Non-Tax-Qualified (NTQ) and Grandfathered LTC Insurance; Tax-Qualified (TQ) LTC Insurance; Partnership LTC insurance; Group LTC Insurance (if Tax-Qualified); Life insurance riders which meet 7702B(b) criteria and Life insurance policies and annuities which “provide directly or supplement” LTC insurance.
- 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 Cares 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).
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 WA Cares payroll tax deduction exemption with employer.
January 1, 2022
Employers begin deducting WA Cares payroll tax.
State plan benefits become available to employees and retirees.
FAQ for Employers and Employees
(click on question for details)
LTC Payroll Tax and WA Cares Background
In 2019, Washington State Gov. Inslee signed into law the Long Term Care Services and Supports Act (LTC Trust Act). This program, called WA Cares Fund, will establish a state-funded long term care insurance for qualifying Washington state residents.
Check the WA Cares Fund Website for details.
The WA Cares Fund LTC 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 WA Cares 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 WA Cares 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 WA Cares 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 an eligible long term care insurance policy that was issued and in-force before November 1, 2021.
As of May 4, 2021, long term care insurance that is eligible for an exemption generally includes the following:
- Non-Tax-Qualified (NTQ) and Grandfathered LTC Insurance
- Tax-Qualified (TQ) LTC Insurance
- Partnership LTC insurance
- Group LTC Insurance (if Tax-Qualified)
- Life insurance riders which meet 7702B(b) criteria
- Life insurance policies and annuities which “provide directly or supplement” LTC insurance.
Check the WA Cares Fund Website for details.
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.