Washington State's New Long-Term Care Payroll Tax
As a heads up, Washington state’s Long-Term Services and Support Trust Act goes into effect on January 1, 2022. Employers must withhold a new 0.58 percent payroll tax for employees who work in Washington and remit those payments to the state quarterly. This tax will support the new state-run long-term-care (LTC) services program (“WA Cares Fund”).
Although employers are not required to provide any notices about the new law, it's a good idea to inform your employees about the coming tax. Employees only have until November 1, 2021, to purchase their own private LTC insurance and apply for an exemption. Also, as the Nov. 1 exemption deadline approaches, prices may increase and the quoting response time may slow down. You may want to encourage your employees to start early.
Overview of Employer Responsibilities
This is not a tax on employers—but employers are required to collect premiums through employee payroll deductions and remit proceeds to the Employment Security Department (ESD). ESD will deposit funds in a trust for the individual until they qualify for the benefit.
- WA Cares Fund has created an employer toolkit
- Beginning January 1, 2022, employers are required to collect premiums through a payroll deduction equal to 0.58% of employees’ wages (with no cap).
- Consider what payroll processes and procedures you need to implement this new premium assessment.
- Employees who have their own private long-term care insurance before November 1, 2021, may apply to ESD for an exemption between Oct. 1 - Dec. 31, 2021.
- Employees must provide an employer with proof of their ESD exemption before the employer can waive collecting the premium assessment from the employee’s wages.
- Employers must remit premium payments quarterly to the Washington State Employment Security Department (ESD) beginning in April 2022.
In 2019, Washington state enacted the Long-Term Services and Support Trust Act to provide long-term care services to those who pay into the program and need assistance with daily activities. This will be funded with a payroll tax of 0.58% starting January 1, 2022.
The payroll tax is intended to alleviate some financial pressure on the federal- and state-tax supported Apple Health (Washington’s Medicaid system), which is being used for long-term care, among other uses. The payroll tax will support a fund to provide some long-term care payments under the long-term care insurance program (known commonly as the “WA Cares Fund”). Learn more at www.wacaresfund.wa.gov.
- Washington State Long Term Care Program: Employers Must Collect Employee Premiums Starting in January | Littler (7/9/21)
- New State Employee Payroll Tax Law for Long-Term Care Benefits | Washington State Hospital Association (6/3/21)
- New Washington Payroll Tax to Pay for ‘Free’ Long-Term Care Benefits from the State | JacksonLewis (5/3/21)
- Not Aware of the Washington State Long-Term Care Program? – Employers Take Notice and Act Quickly | Davis Wright Tremaine (4/16/21)
- Long-Term Services and Supports Trust Act - Flyer