In 2021, Washington established a long-term care benefit program for Washington workers called the WA Cares Fund. In short, the program implements a mandatory 0.58 percent payroll deduction on employee wages to create a state trust fund, which, beginning in 2025, will be used to fund certain long-term care costs for eligible Washington workers. Each eligible Washington worker is entitled to a lifetime benefit of up to $36,500, which will be adjusted annually for inflation. The regulatory scheme implementing the program is still being developed, and we will update the below information on our Washington blog about the program as the regulatory rules are finalized and implemented.
Key elements of the program include the following:
|How much must workers contribute?||Under the program, employers must deduct a payroll tax equal to 0.58 percent of worker wages each pay period (wages x 0.0058).
For high-wage workers, contributions are not capped. The program taxes all wages and compensation, including bonuses, gifts, severance payments, and stock-based compensation. Tips are not included in wages.
|Do employers contribute?||Employers are not required to contribute to the program. However, employers may decide to pay their employees’ WA Cares Fund premiums.|
|When do deductions begin?||Employers must collect deductions for participating workers beginning January 1, 2022, and remit those premiums to the Employment Security Department on a quarterly basis.|
|Which workers are included?
|All Washington workers are included, unless:
Note: Once exempted CBA agreements are reopened, renegotiated, or expire, workers to which the CBA applies will be subject to the program.
|How are remote workers treated?||Employers must withhold premiums for workers whose work is “localized” in Washington, which includes employees who perform all or most of their work within Washington.
If only some of an employee’s work is performed in Washington, employers may still be required to implement the payroll tax for the worker based on several factors (such as the base of operations, the location where the services are directed or controlled, and the employee’s residence).
|May self-employed workers opt in to the program?||Self-employed workers are not required to participate in the program, but may opt in to the program through an application.|
|What benefits does the program provide?||Program participants receive $36,500 in lifetime benefits, adjusted annually for inflation.
An eligible participant may use program funds for:
|When do benefits begin?||Eligible workers may apply for, and receive, benefits beginning January 1, 2025.|
|Who is eligible for benefits?||The Washington State Department of Social and Health Services determines eligibility. To be eligible, workers must: (1) be vested in the program, and (2) need help with at least three activities of daily living.
Note: A “year” is one in which the individual worked at least 500 hours.
|Who may consider opting out?||Several categories of employees may consider opting out of the program, including the following:
Workers who expect to retire before they vest in the program may contribute to the program before they have an opportunity to receive benefits.
Benefits are limited to Washington residents. Therefore, workers and/or retirees who move out of Washington will not qualify for benefits.
|How do workers opt out?||Workers who are over the age of 18 may take the following steps to opt out of the program:
Step 1. By November 1, 2021, purchase qualifying private long-term care insurance.
Step 2. Between October 1, 2021, and December 22, 2022, apply for a program exemption by submitting an application to the Washington Employment Security Department (ESD) which attests that the worker obtained a qualifying long-term care policy prior to November 1, 2021.
Approved exemptions are not effective until the quarter immediately following approval. For example, if the ESD approves a worker exemption on January 1, 2022, the worker’s wages will be taxed through March 31, 2022. In other words, end-of-year bonuses or commission payments often paid in the first quarter will be reduced by the program payroll deduction.
Step 3. Submit the ESD approval letter to their employer.
|Is opting out permanent?||Once a worker opts out, there is no way to opt back into the state program. It is not yet clear whether a worker may drop private long-term care coverage after permanently opting out of the state benefit.|
|What are the employer’s duties under the program?||The employer has five primary duties:
The current law and draft regulations do not require employers to provide advance notice to employees about the program, their ability to opt out or become exempt from the program, or that deductions will begin on January 1, 2022.
Washington is expected to provide additional clarification to the WA Cares Fund through regulations, and legal challenges to the program are expected under preemption grounds under the Employee Retirement Income Security Act. Ogletree Deakins will continue to monitor and report on developments with respect to the WA Cares Fund and will post developments on the firm’s Employee Benefits and Executive Compensation, Wage and Hour, and Washington blogs as additional information becomes available. Important information is available via the firm’s podcast and webinar programs.