Broker Check

Washington Long Term Care Tax

The State of Washington recently began implementing the WA Cares Fund, a program designed to provide a minimal long term care benefit to qualifying Washington residents.  It is extremely important that you understand how this new program affects you and your loved ones.

What is this new program?  

The WA Cares Fund is designed to provide basic coverage for long term care costs to qualifying Washington residents, funded through a new payroll tax.

What benefit does it provide?

The program provides a benefit of $100/day for qualifying long term care expenses (nursing home, assisted living, home health care, etc.), but only up to a maximum of $36,500 in lifetime benefits.

Who will receive benefits?  

Washington residents that have paid into the program for at least 10 years (3 years under special circumstances) will be eligible for benefits.  To qualify for benefits, an eligible resident must need assistance with at least 3 activities of daily living (eating, bathing, dressing, transferring, toileting, et al.).

How much will I pay?  

The program is funded through an initial 0.58% payroll tax.  As an example, if you made $100,000 per year, your cost would be $580 per year.  This tax will be calculated on all earned income – including stock-based compensation, bonuses, and severance pay.  This means that higher wage earners will pay more for same benefit as lower wage earners.  There is no cap to this cost, and the tax rate can go up in the future.

Are all Washington residents affected?

No.  If you are retired, you will not pay into nor be eligible for benefits.  If you are self-employed, you will not be automatically enrolled but will be able to opt-in if you choose.

Can I opt out?

Yes.  If you already own or purchase a private long term care insurance policy or rider with benefits equal to or greater than the state provided benefit, you can file for a waiver.  This coverage must be in place by November 1st, 2021. Waivers can only be filed between October 1st, 2021 and December 31st 2022.  Once you opt out, you will not be allowed to opt back in.

How are employers responding?

While employers do not pay into the program, some larger companies have begun offering a group long term care insurance program to give their employees an opportunity to purchase coverage that would allow them to opt out of the WA Cares Fund.

Should I opt out?

If you are an average or below average wage earner, or you have health conditions that would prevent you from getting private long term care insurance, the new program may be appropriate for you.  Opting out may be more appropriate if:

  • you are in good health, and currently earn or expect to earn an above average income, and you are able to purchase private coverage that costs less, provides greater benefits, or both.
  • you plan to retire within 10 years.
  • you plan to move out of the state.

What should I do now?

If you have questions about how the WA Cares Fund affects you or whether or not you should opt out, reach out to Optimist Retirement Group for a free consultation.  It is important to note that applying for and putting alternate long term care insurance in place takes time, and most recommend applying for coverage before July 2021 to provide adequate time to place coverage before the November 1st deadline.