Beginning in January 2022, all Washington workers will pay 58 cents per $100 of their earnings to fund the Long-Term Care Trust Act (LTCTA). There is no limit to how much you will contribute to the LTCTA throughout your life; however, there is a limit to the benefits.
You must opt-out and secure a comparable long-term care plan before Nov. 1, 2021.
For your contribution, you will receive up to $100 per day for a maximum lifetime benefit of $36,500 (adjusted annually). This benefit is available only for care provided in the state of Washington for Washington residents and is not transferable.
If you plan to retire in sunny Arizona or Florida, you will lose your entire contribution into the system.
If you plan to retire within the next 10 years, you will not receive a benefit for your contribution because you must work 500 hours per year for 10 years to be vested. Therefore, if you retire in 9-and-a-half years, you will lose your entire contribution into the system.
Self-employed people can choose to opt into the program between January 2022 and January 2025, or within three years of first becoming self-employed for the first time. Self-employed opt-ins are irrevocable.
I agree that long-term care planning is needed and often neglected. However, this is a very flawed program that provides little benefit with lots of restrictions. I know we can do better than this. The lack of portability, limited maximum benefit, disregard for workers within 10 years of retirement and lack of a hardship exception are just some of the reasons this new tax is bad policy. This is another one-size-fits-all scheme that places more burdens on families and businesses.
When can a vested individual use the benefits?
To utilize the benefits, vested individuals (people working 500 hours per year for 10 years) must reside in Washington and need assistance with a minimum of three of 10 Activities of Daily Living (ADLs): medication management, personal hygiene, eating, toileting, transferring, body care, bathing, ambulation/mobility, dressing and cognitive impairment. Individuals who meet these requirements may begin applying for benefits in January 2025.
How can the fund be used?
The funds can only pay for providers who are on a Department of Social and Health Services approved list for services. Funds can be spent on nursing facilities, residential settings like assisted living and adult family homes, professional caregiving like home health care, wheelchair ramps, emergency alert devices, medication reminders, Meals on Wheels, rides to doctor appointments, dementia education, caregiver support and care coordination. Family members may qualify to receive funds upon receiving 21 to 35 hours of formal training to care for beneficiaries.
Can you opt out of the fund?
Washington employees ages 18 years or older have a small window of time to permanently opt-out of the LTCTP and its career-spanning payroll tax. To opt out, employees must have purchased comparable long-term care insurance before Nov. 1, 2021.
Once a plan is purchased, employees must apply for an exemption from the program to the Employment Security Department (ESD) between Oct. 1, 2021, and Dec. 31, 2022. If ESD accepts the application, the individual is permanently exempt from the payroll tax and ineligible for future coverage from the Long-Term Care Trust Program. Once approved, employees must provide all current and future employers with notice of the exemption to maintain exemption from payroll tax.
Workers can secure long-term care insurance or add a rider to their life insurance policy through private companies that provide benefits equal or better than the state payroll tax funded program.
Is it constitutional?
Washington state’s constitution does not currently allow for graduated income taxes to be assessed by the state. According to Washington’s constitution “all taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only.” Some legislators call this a “premium assessment” and not a tax to circumvent the prohibition and only the income of W-2 employees is taxed, not the income of self-employed individuals.
How did we get here?
In 2019, the Legislature enacted HB 1087, the Long-Term Care Trust Act. This act was pushed by the governor's majority party as a response to the weak private long-term care insurance market at the time and the state’s high expenditures on long-term care through Medicaid.
In the 2021 session, the Legislature passed HB 1323 relating to the Trust Program, which I voted against. This legislation enacted a package of recommendations forwarded to the Legislature by the Trust Commission and moved up timelines for employees to opt out, set timelines for a self-employed individual to opt in and allowed tribes and individuals who were disabled before the age of 18 to qualify for the program.
I am speaking to small business owners and working families confused and concerned about this new regressive payroll tax.
People are scrambling to make sense of it and the opt-out deadline is approaching quickly. Unfortunately, agency “rules and regulations” governing the plan are still being developed. I encourage employers and employees to start planning and researching this issue to compare with private policies. If not, the decision will be made for you.
Find additional information online at wacaresfund.wa.gov.
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State Rep. Peter Abbarno is a Republican from Centralia who represents the 20th Legislative District. He’s also an attorney and former member of the Centralia City Council.
