Your Guide to Washington’s Long Term Care Trust Act

Washington State Long Term Care Trust Act

On April 21st, Governor Jay Inslee signed the Long-Term Services and Supports (LTSS) Trust Act. The purpose of the LTSS is to fund long-term care for Washingtonians who are unable to perform at least three Activities of Daily Living (ADL), such as getting dressed, using the toilet, or remembering to take medication.

You can visit the WA Cares Fund website for more details straight from the state government, or continue reading for our TL;DR version!

Washington’s Long Term Care Trust Act:
How the Benefit Is Funded

This Washington-specific Long-Term Care (LTC) program is funded by a tax on Washington State employees. Here’s a quick summary of the details:

  • The tax is 0.58% on all employee income. This includes wages (salary, hourly, overtime, holiday pay, most PTO), bonuses, commissions, and severance pay. There is no upper limit on earnings like there is for social security.
  • This tax must be collected starting January 1, 2022.
  • You must pay the tax if you are an employee who performs the services of your work in Washington State. If you provide some services in WA and live there, you are likely subject to the tax.
  • Employers are not required to contribute to this program, but they are required to collect and remit the tax on behalf of employees, and retain records of any exemptions (we’ll get to exemptions further down).

If your payroll people are unaware of this tax, now is the time to tell them! It’s never too soon to start planning how to administer a new payroll tax. If you are not using payroll software for your business, we highly recommend that you start doing so.

Washington’s Long Term Care Trust Act:
Who Benefits From the Fund

The WA Cares Fund is funded by Washingtonians, for Washingtonians. As we stated above, the fund is for those of us who are unable to perform at least 3 Activities of Daily Living. Additionally, the program is only available for individuals who have sufficiently paid into it.

You are eligible for the WA Cares Fund if you have:

  • Worked in WA for 10 years, working at least 500 hours per year, and have not taken a break of 5 consecutive years during that period
  • Worked for at least 500 hours for 3 of the last 6 years from the date you apply for benefits

Benefits will be available beginning January 1st, 2025.

Those eligible to receive benefits will receive $100 per day, up to a $36,500 lifetime cap, that they can use to pay for expenses related to LTC. This money can be used to pay family members and will be adjusted for inflation annually.

Unfortunately, as you can see from the above list, there is no guarantee that you will benefit from the money you pay into this program. Alternatively, perhaps you expect that you would end up contributing more to the program than you would receive later in benefits. Read on to see your options to exempt yourself from this program.

Washington’s Long Term Care Trust Act:
Can You Avoid Paying the Tax?

There are ways out of paying the LTC tax, provided that you understand that you will also be “exempting yourself” from any benefits of the program.

If you are over the age of 18 years old or will be by November 1, 2021 and you purchase your own private LTC program* by that date, you can opt-out of the state LTC plan by applying between October 1st and December 31st, 2021. You will likely have to pay annually for your own long-term care. The purpose of this requirement is that Washington wants to ensure that every Washingtonian has access to some kind of LTC if or when it is needed.

* Special note for transgender and/or non-binary Washingtonians: While the WA State LTC program is the same for all genders, private insurers often require applicants to select “Male” or “Female” when applying. Insurers may require you to use the gender you were assigned at birth regardless of your current gender or lack thereof.

Please note that there are no “take-backsies!” If you exempt yourself from the State LTC program, you cannot change your mind later.

Note to employers: If one of your Washington State employees opts out of the program, you are responsible for ensuring that the employee does not have LTC tax deducted from their paycheck. The WA State Employment Security Department will not refund LTC taxes that have been remitted by mistake!

TL;DR: Starting in 2022, WA State employees must pay a new 0.58% tax for the WA Cares Fund, which is meant to provide a cash payment to Washingtonians who need assistance with Activities of Daily Living (ADL). The benefit starts in 2025 and will be $100 per day (adjusted annually for inflation). If an employee wants to opt out of the tax (and the benefit), they can purchase their own private Long-Term Care insurance by November 1, 2021, and apply for an exemption between October and December this year.

P.S. Want to learn how to manage your money better as a therapist? Now you can learn directly from Toni Cameron, CPA with our new on-demand webinars! Check out our most popular webinars here.
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Toni Cameron, CPA

Business Consultant, CFO Services, "The DM"

Toni is an accountant by day and gaming geek by night. As an accountant, Toni’s focus is dedicated to people like you — individuals, nonprofits, and small business owners. Toni’s adamant about taking care of all the things you just don’t have time to because she understands the value of a proper work-life balance.

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