Washington State has established a new plan, the Washington Cares Fund, which provides a minimal long-term care (LTC) benefit for vested Washington residents.
You may have already heard about this new plan, but as a client of HKP, we wanted to share a few key highlights.
How the plan will be funded:
- The plan will be funded by a mandatory payroll tax for all W2 employees working in Washington, beginning January 1, 2022.
- The tax is withheld by the employer and is then remitted to the State.
- The current tax rate is $0.58/$100 of income earned, but this rate can be increased every two years.
- There is NO salary cap for this tax, and it will be calculated on ALL income earned as an employee (including bonuses, stock payouts, etc.).
Covered individuals under this new plan, and opting-out or opting-in:
- All Washington employees will be automatically enrolled beginning November 1, 2021.
- If the employee qualifies for an exemption to the state plan, they will need to apply for the exemption with the state and provide proof of the exemption to their employer.
- Once an individual is enrolled in this plan, they may not opt out of the plan in future years.
- Self-employed individuals are not automatically enrolled but may opt-in to the plan beginning in January 2022.
Benefits and vesting in the plan:
- To become vested in the fund, you must pay the tax for a minimum of ten-years.
- Payouts are only available residents of Washington State (the program is not portable to those who move out of state; nor are employees working in Washington and residing in other states eligible, although they must pay into the plan).
- The fund has a lifetime benefit cap of $36,500 (up to $100 per day, for 365 days). The payment cap may be adjusted down based on fund demands.
Please note: The window for opting out of this program is quickly closing. The only way to qualify for an exemption and opt-out of this mandatory tax is by having a qualified long-term care policy in place PRIOR to November 1, 2021. “Qualified” is defined as “mirroring or better than” the state’s plan.
If you are an employer, you’ll need to begin withholding this additional tax starting with wages paid January 1, 2022 for all Washington State employees, unless they have provided proof of exemption from the state.
If you have questions about how the state’s plan may impact you, please feel free to reach out to us.