Washington’s new long-term care payroll tax goes into effect on January 1, 2022. Known as the WA Cares Fund, it is a first of its kind program in the nation that aims to provide eligible workers with up to $36,500 in long-term care benefits beginning in 2025. It is paid for by a tax on employees’ wages.
The program, which the Washington Legislature passed in 2019, imposes a payroll premium of $0.58 per $100 in earnings beginning in January. The tax is mandatory, and employees—not the employer—must pay the tax. Employers are not required to contribute.
Earlier this year, the Washington Legislature approved a one-time opt out for those who obtained private long-term care insurance by November 1, 2021. More specifically, any employee who attests that they have comparable long-term care insurance purchased before November 1, 2021, may apply to the Employment Security Department (ESD) for an exemption. The employee must then provide proof of their exemption to their employer before the employer can waive collecting the premium assessment from the employee’s wages. The employee must apply for the opt-out exemption to ESD between October 1, 2021, and December 31, 2022. Employers should remind employees of this tight deadline. Employees who apply for the opt-out exemption will receive a letter from ESD and will need to provide a copy to their employer.
Employees Subject to the Tax; No Cap on Amount of Wages Taxed
Notably, there is no cap on the amount of wages that are taxed, and the program applies to all employees employed in Washington with the exception of individuals who are self-employed, federal employees, employees of a federally-recognized tribe, certain employees subject to a collective bargaining agreement, and those who qualify for an exemption. An employee is treated as employed in Washington if the employee’s service is “localized” in Washington, or, if the employee’s service is not localized in any state, if the employee performs some services in Washington and the services are directed or controlled from Washington. Therefore, an employer must make this determination and comply if necessary. ESD states that generally, employers will need to collect premiums for WA Cares from the same employees for which the employers pay premiums for Paid Family and Medical Leave.
In effect, this likely means that out-of-state employers will need to collect and remit premiums for their employees who work primarily in Washington including remote employees. For out-of-state based employers with Washington-based employees (or employees working remotely in Washington), contact the FWW employment law attorneys for support in determining whether the WA Cares Fund tax applies.
Eligibility for Benefits
In order to be eligible for WA Cares Fund benefits, an employee must have worked and contributed to the fund for:
A total of 10 years without an interruption of five or more consecutive years; or
Three of the last six years at the time the employee applies for the WA Cares Fund benefit; and
- Worked at least 500 hours per year.
Additionally, to be eligible for benefits an employee must be at least 18 years old and a current resident of Washington.
The benefit is not transferrable if the employee moves out of state. Additionally, many employees who are older may never be able to collect on this benefit prior to retirement.
Setting up Payroll Deductions
Beginning January 1, 2022, employers will need to collect premiums from their employees in the same manner in which they do now for Paid Family and Medical Leave (PFML), and ESD is in the process of updating the PFML reporting system so that employers can report for both programs at the same time. More information on calculating and collecting premiums, as well as a variety of other resources, can be found on the WA Cares website.