Long-term payroll tax quickly approaches with November 1 opt-out deadline
When the long-term care (LTC) program was initially passed in 2019, it allowed individuals to opt-out of the program at any time if they have private LTC insurance up until December 31, 2022. Due to HB 1323 passed earlier this year, only individuals who have purchased private LTC insurance by November 1, 2021 would qualify for an exemption. The catch is, even if your application for an exception is eventually approved, you will begin paying 58¢ of every $100 of income to the program, now referred to as the Washington Cares Fund (WCF), in addition to your privately purchased policy. The state will not refund what was paid into the fund before an exemption approval unless the legislature takes further action.
Another caveat to the WCF is the amount you will pay, as the tax rate is not set in stone. While it will be at a fixed 0.58% for the first two years, after that, the tax rate will be set by the Pension Funding Council at the “lowest amount necessary to maintain the actuarial solvency of the long-term services and supports trust account.” According to the Long-Term Services and Supports Trust Commission (LTSSTC), the payroll tax rate might need to increase to 0.66% to maintain long-run solvency.
What you need to know:
- Unlike the Paid Family Medical Leave with a deduction limit tied to the Social Security tax ($142,800 in 2021), the $0.58 per $100 of earnings premium rate applies to the whole paycheck without a ceiling.
- Though the contribution rate is based on earnings, the lifetime maximum benefit of $36,500 with cost-of-living built-in is the same for all.
- The benefit is not portable from state to state. In other words, Washington state workers who move out of state or retire to a different state will not be able to access benefits regardless of the amount of their contribution.
- This program is solely funded by workers.
- Self-employed earners must opt-in for the WCF, the same exemption criteria the Family Leave Act, but there are time limitations.
- To be eligible to receive the benefit, you must meet specific qualifications of contribution and need.
- According to the American Council of Aging, the maximum lifetime benefit would last a Washingtonian less than four months in the average nursing home.
Employers are responsible for communicating details of the program and process premiums on their behalf.
Retail Services will be hosting an informational webinar with ESD regarding the WCF on August 10 at 10:00am, PST. Click HERE to register for this free event.