In 2019, the state of Washington passed the Long-Term Care Trust Act. It intended to provide a small amount of long-term care (LTC) coverage for Washington residents. The program begins in January 2022 with the enactment of a mandatory uncapped payroll tax of 0.58% on all wages. This will be collected by employers and paid to the state. To vest in the program, individuals must work at least 500 hours per year, pay premiums for a total of 10 years without a break for 5 consecutive years or when they pay premiums for 3 (500 hours) of the last 6 years at claim time. Individuals can go on claim beginning January 1st, 2025. The maximum lifetime benefit is $36,500 and may be indexed (WA CPI Board) for inflation in the future. You can read more about it here: http://www.wacaresfund.wa.gov/
With our aging population, there is a need to have a plan to cover long-term care. The annual state median cost of home health care is $72,000/year*. Assisted living costs $69,000/year*. Semi-private nursing home median cost is $114,000/year*. So, you can see that the benefit the state will provide most likely will not cover your full long-term care needs.
Some considerations:
- This is not an insurance policy, but a state benefit program.
- This does not provide coverage for a non-working spouse.
- There is no cap on the income for the payroll tax.
- Most likely, those of you within 10 years of retirement in good health will not see a benefit from this program due to not meeting the 10-year employment requirement or by going on claim within 3 years of retirement.
- You must be living in WA when you file a claim.
- No WA LTC Partnership Benefits for Asset Protection
- You will pay the payroll tax for the length of your employment in WA with no refunds if you move out of state or pass away.
- If you are W-2 employee employed in Washington, you are allowed to apply for an “exemption” to the mandatory payroll tax. If you receive an exemption, once exempt, you are ineligible to join the program.
- If you are self-employed, a contract employee, or a business owner, this is a voluntary program for which you can apply to enroll into between January 1st, 2022, through December 31st, 2025. You are currently not enrolled unless you apply.
If you are age 20 and older, you can obtain creditable Long-Term Care insurance prior to November 1, 2021 and apply for an exemption. Some options include:
- Traditional LTC (age 45 or older)
- Life Insurance with LTC rider (all ages)
- Annuity with LTC rider
- Group LTC through your employer
Important information for filing for an exemption:
- Exemption is issued through the WA Employee Security Division (ESD).
- Filing window opens October 1st, 2021, runs through December 31st, 2022
- Employee receives exemption letter which they must give to their employer
- Employee needs to retain the letter for future employers.
Our team at GPS Solutions would be happy to answer any questions you may have about this new law and tax. We can work with you to determine a suitable long-term care option for you and your family. We can also to keep you informed about the tax exemption process and keep your exemption letter on file as a back-up.
Contact us to discuss your options regarding this tax!
CLICK HERE for a Video presentation on the ins and outs of the WA State Cares Fund
*2021 Genworth Cost of Care
This content is solely for informational purposes only. The information is based on data gathered from what we believe are reliable sources. It is not guaranteed by Waddell & Reed, Inc. as to the accuracy and is not intended to be used as the basis for any investment decisions and is not a recommendation of any kind.
(05/21)