Washington State Payroll Tax Update
Long Term Care Client Resources
Updated April 2021
Washington State Payroll Tax / Overview
- 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 with their employer between October 1, 2021, and December 31, 2022. Individuals have until November 1, 2021 to acquire private qualified long-term care 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 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).
WASHINGTON STATE LEGISLATIVE UPDATE
Updated April 2021
In 2019, Washington state’s Long Term Care Services and Supports Act (Second Substitute House Bill 1087, or “LTC Payroll Tax Law”) became effective. The LTC Trust Act is intended to provide qualifying Washington residents with a maximum of $36,500 in long term care benefit payments. The state plans to raise revenue for the LTC benefit payments via a mandatory payroll tax of 0.58% (with no income limitations) on w-2 income of Washington residents beginning in January of 2022. The state plan benefit duration is one year.
In February of 2021, Washington state house amended and passed a revised WA LTC Trust Act (HB 1323), providing a short window of time within which Washington residents may request an exemption from the LTC payroll tax. As it reads, individuals have until November 1, 2021 to acquire private LTC. Those with private LTC insurance coverage may submit an exemption request to the Washington state Employment Security Department. Once the exemption is granted, it is irrevocable, and the employee/resident is permanently ineligible to receive benefits under the LTC Payroll Tax Law. The employee/resident is responsible for notifying his or her employer of the exempt status so that no LTC payroll taxes are withheld.
If you would like to discuss options for private LTC coverage that would qualify you for the LTC payroll tax exemption, please contact:
Karen Dacek at email@example.com
Shannon Hahn at firstname.lastname@example.org
November 1, 2021
State deadline for private LTC insurance policies to be issued and in force to be eligible for exemption.
October 1 – December 31, 2022
Time period to apply for payroll tax deduction exemption with employer.
(Exemption application requires proof of private LTC insurance. See above)
January 1, 2022
Employers begin deducting WA state LTC payroll tax.
State plan benefits become available to employees and retirees.