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Washington Long Term Care Tax

August 17, 2021
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We have received many questions about Washington State's long term care act and the taxes associated. As the implementation date approaches, we are receiving more and more questions so we thought a refresher would be appropriate:
 
The Washington Long Term Services and Supports Trust (LTC) Act was passed in 2019 and is slated to begin in January of 2022. Here is what you need to know:
 
  • This is the nation’s first public-operated long-term care insurance program.
  •  The insurance will be funded by a mandatory payroll tax for all employees; the beginning tax rate will be 0.0058% and there is no cap. 
  • The benefits include a maximum rate of $100 per day to a lifetime maximum of $36,000.
  • While the payroll tax becomes effective January 1, 2022, the benefits are not available until 2025. 
  • To receive the benefit you must have contributed: at least 10 years without a break of 5 or more years, or 3 of the past 6 years, and have a need for assistance with activities of daily living. Additionally, an employee must have worked at least 500 hours during each of the 10 years or 3 years to qualify.
  • Employees that plan to retire in the next 10 years will pay premiums but may never qualify for benefits. Additionally, retirees that move out of state will not qualify for benefits. 
 
Most questions we receive involve “opting out” of the state program. In order to qualify for this one-time exemption, you must have a qualifying long-term care policy in force prior to November 1st, 2021. You must then apply for the exemption with the Employment Security Department between October 1st and December 31st, 2022. If you are approved for an exemption, you can never become eligible for benefits under the program.
 
Unfortunately, at this time, the majority of approved Long Term Care Insurance Companies have suspended new policy sales in the state of Washington. It is also unlikely that a new application could complete underwriting and be in force by the November 1st deadline. One option to consider is whether your employer offers a qualifying group long-term care policy. Contact your HR department for details.