Washington Governor and Legislative Leaders Announce Delay in Long-Term Care Fund

On December 17, 2021, Washington Governor Jay Inslee, Senate Majority Leader Andy Billig, and House Speaker Laurie Jinkins released a joint statement announcing that the premium assessment under the Washington Cares Fund would be delayed. Employers had been set to collect premiums from Washington employees starting on January 1, 2022, but with this announcement, state leaders have “strongly encourage[d]” employers to “pause on collecting premiums.”

Background

In 2021, Washington established a long-term care benefit program for Washington workers called the WA Cares Fund. The program was set to implement a mandatory 0.58 percent payroll deduction on employee wages to create a state trust fund, which, beginning in 2025, would be used to fund certain long-term care costs for eligible Washington workers. Employers were set to begin collecting premiums from employees on January 1, 2022.

Recent Challenges

A citizens’ initiative (I-1436) was introduced on June 29, 2021, which proposed allowing workers the choice to opt in or out of the state’s long-term care insurance scheme, as the law had previously allowed only a one-time opt-out window. Then, on November 9, 2021, a class action lawsuit was filed in the U.S. District Court for the Western District of Washington alleging that the law was preempted by the Employee Retirement Income Security Act (ERISA), was unconstitutional, unlawfully discriminated against employees based on age and residency, and violated other laws. The lawsuit asked the court to enjoin enforcement.

The Latest Announcement

Governor Inslee said in the joint statement that he was ordering the state’s Employment Security Department not to collect premiums from the program until the legislature addresses some of the law’s issues.

What Does This Mean for Employers With Washington Employees?

Employers will not be subject to penalties and interest for not withholding premiums from employees’ wages during the transition period. Senator Billig and Speaker Jinkins said in the joint statement that allowing employers to pause premium collections would give the legislature “time to pass legislation extending implementation dates until next year.” The lawmakers also stated that the legislature would work on developing improvements to the WA Cares Fund in the 2022 legislative term.

Washington is expected to provide additional clarification on the WA Cares Fund through regulations. The legal challenges to the program are expected to continue based on preemption grounds under ERISA.

Ogletree Deakins will continue to monitor and report on developments with respect to the WA Cares Fund and will post updates on the firm’s Employee Benefits and Executive Compensation, Wage and Hour, and Washington blogs as additional information becomes available. Important information for employers is also available via the firm’s podcast and webinar programs.