Updated: Jul 8, 2021
The passage of Long-Term Services and Supports (LTSS) Trust Act, effective January 1, 2022, makes Washington the first state in the nation to require that its working residents secure a long-term care plan. Washington residents can either participate in a publicly funded insurance program where they can vest into a basic level of long-term care (“LTC”) benefits, or they can opt-out and buy a private policy that best suits them.
In order to opt-out of the WA Cares Fund, an employee must attest that they have “long-term care insurance” in order to apply for an exemption from the new payroll tax. Note that once the employee is determined to be exempt, they may not later apply to become a qualified individual or eligible beneficiary – they are permanently ineligible for coverage under the WA Cares Fund.
Why Opt-Out of the WA Cares Fund?
The state program delivers poor quality long-term care benefits and subjects you to a new payroll tax that will continue to increase as your wages grow throughout your career (the tax starts at $0.58 per $100 of wages). The current lifetime maximum long-term care benefits delivered are only $36,500. For higher wage Washington employees, this creates a situation where your cumulative payroll taxes could become greater than any potential long-term care benefits delivered to you under the WA Cares Fund.
For example, an employee with $100,000 in wages, will have to pay a new annual tax of $580. Let's say in 5 years, the same employees wages are now $200,000. The annual tax cost for the same level of long-term care benefits would go up by 100%.
How Does the WA Cares Fund compare to a Private Insurance Policy?
We recommend all higher wage earners opt-out of the WA Cares Fund before the deadline of October 31, 2021. Below outlines the benefits of a personally owned hybrid long-term care life insurance policy vs the WA Cares Fund:
Solution: A Company-Sponsored Long-Term Care Plan
Our firm has developed a company-sponsored long-term care plan that allows Washington State employees to opt-out of the WA Cares Plan. This plan will allow Washington employees' to acquire and pay for a new hybrid long-term care life insurance policy. This new policy will allow the employee opt-out of WA Cares Fund and not be subject to the new $0.58 per $100 of wages payroll tax.
Lower Cost + Higher Benefit: Acquiring your own insurance policy will be at a lower unit cost and provide higher LTC benefit amounts.
Protect Retirement: Private coverage allows you to guarantee your costs and receive benefits anywhere in the world.
Eliminate the New Payroll Tax: Securing private coverage allows you to opt-out and eliminate the new $0.58 per $100 in wages payroll tax.
Please schedule a time with our team to discuss how your company can offer a company-sponsored long-term care plan for your Washington employees. You can also learn more here: https://www.trcfinancial.com/wa-company-sponsored-ltc-plan
This is not an offer to sell a security or insurance product. This information is provided for informational purposes only and should not be construed as legal or tax advice. You should discuss your circumstances with a financial professional before making any decisions. This material and the opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. https://www.trcfinancial.com/disclosure