Washington Cares Fund
Washington State has a new fund and related tax called the Washington Cares Fund, which has been developed to help mitigate the costs of long-term care for workers in the state. The law goes into effect as of January 1, 2022. What follows is an overview of the new law.
The fund is paid into by all Washington employees at a rate of up to 0.58%, or $0.58 per $100 of W-2 earnings, beginning in January of 2022, with no income cap. Employers do not pay into the fund. Eligible employees may begin using benefits from Washington Cares as of 2025 after meeting the vesting requirements.
Employees do have the option to apply for an exemption (opt-out) from the program between October 1, 2021, and December 31, 2022. This is the only window available for opting out at this time, and any withheld premiums paid before you apply for and receive your exemption approval are non-refundable by the state.
In order to opt-out, you must be 18 or older and have purchased a qualifying private long-term care insurance plan before November 1, 2021. The details on which plans qualify may be found on the Office of the Insurance Commissioner’s website at this link. Exemption (opt-out) applications will be available on the Washington Cares site starting October 1, 2021.
Here are some reasons why someone may want to opt-out:
- If you make over $300,000, you are likely to find an individual plan for less than the cost of the tax. For example, if you make $350,000 the cost of the tax is $2,030.00. You can check with your insurance agent to see what the annual cost of an individual long term care insurance plan would be for you and compare it to this cost.
- If you are planning to move before retirement, and you are able to find a plan for the same or less than the cost of the tax, you may want to opt out. The benefits of Washington Cares are only accessible if you receive the care in Washington State.
- The maximum benefit is $100/day and lifetime maximum is $36,500, so you may be able to find individual plans with better benefits for similar costs as the Washington Cares tax.
It is important to note that the exemption is permanent, and once you apply for and are approved for an exemption you may not re-enroll in the program, nor may you access Washington Cares benefits in your lifetime. You must also provide the exemption approval letter you receive from the Employment Security Department (ESD) to all current and future employers to avoid the automatic withholding of the Washington Cares premiums, which are non-refundable.
To be vested in the fund and eligible to receive benefits, you must have worked at least ten years in Washington without a break of five or more years within those ten, or you must have worked three of the past six years and have a current need for assistance with the activities of daily life.
Self-employed individuals in Washington are not automatically subject to this tax, but they may opt-in to the program. The eligibility is the same as for the Washington Paid Family and Medical Leave program, so you can opt-in if you are:
- A sole proprietor.
- A joint venture or member of a partnership.
- A member of a limited liability company (LLC) treated as a partnership.
- An independent contractor.
If you opt-in, you will pay the same rate as other employees, so 0.58% of your net earnings and/or gross wages (if any) paid to you by your business entity.
Applications to opt-in will be available in January of 2022 at the Washington Cares site here.
So, what does this mean for you as an employer? You will not pay premiums into the WA Cares Fund, but beginning in January of 2022, you will be responsible for withholding employee premiums and disbursing them to the state quarterly. The payment and reporting are done the same way as with Washington’s Paid Leave, and the reporting will be fully integrated into the Paid Leave system.
If an employee provides you with a copy of an exemption approval letter from the ESD, you must not deduct WA Cares premiums from their paychecks. Any premiums withheld before notification of the exemption approval are not refundable to the employee. You must also keep a copy of the approval letter in the employee’s file.
More information for Washington employers, including a timeline of Washington Cares Outreach efforts, can be found on the Washington Cares website at this link.