Not Conscious of the Washington State Lengthy-Time period Care Program? – Employers Take Discover and Act Rapidly

Washington State’s long-term care program, which has long been under the radar, should now be a priority for every employer in Washington state – as well as for its employees. The law prescribes care benefits for Washington residents, paid for through a tax on workers’ wages.

Tax / bonus income is expected to begin January 1, 2022. Employees who intend to retire within the next 10 years will be required to pay bonuses – but may not be eligible for the benefit. There is an extremely limited opt-out exception window that will open on October 1, 2021.

Employers must act now to be ready to comply with wage tax deductions and to inform and answer questions from employees.

This advisory provides background information about the long-term care program, a review of the proposed rules, and answers to key questions employees may already be asking, including what actions they must take to sign out.

What is the Washington Long Term Care Program?

The Washington Long-Term Care Program is the first state-run long-term care insurance program in the country. The program, which is codified in RCW Chapter 50B.04, will be financed from January 1, 2022 by a wage tax of 0.0058 (0.58 percent) on all employee wages.

Employers must collect this premium assessment from after-tax payroll contributions and submit these premiums to the Washington State Employment Security Department (ESD) as part of their quarterly reporting. Employers do not have to contribute to the program, they only have to transfer the taxes paid by the employee.

Is there a cap on the amount of wages taxed?

Significant and unlike other government insurance programs, There is no upper limit on wages. All wages and allowances, including share-based payments, bonuses, time off and severance payments, are subject to tax. For example, an employee with a wage of $ 65,000 pays $ 377 each year for the program, while an employee with a wage of $ 250,000 pays $ 1,450 for the program each year.

Which employees are subject to tax / bonus income?

All Washington employees are required to pay taxes into the program. Exceptions are the self-employed, employees of a state-recognized tribe, certain collective bargaining parties and employees who qualify for an exemption (see below).

For the purposes of the program, an employee will be treated as employed in Washington if the employee’s service is located in Washington or if the service is not located in any state, the employee performs some services in Washington, and the services are directed or controlled from Washington (Note that the program defines employment in the same way as the Washington Paid Family and Medical Leave Program).

While we anticipate the ESD will provide clarifying guidance, it likely means that out of state employers will need to collect and transfer bonuses for all employees who work primarily in Washington.

Who is entitled to benefits?

Benefits are limited to residents of Washington who have paid awards under the program for either (1) a total of 10 years without interruption of five or more consecutive years. or (2) three years within the last six years from the date the benefit claim is made. To qualify, an employee must have worked at least 500 hours in each of the ten years or after three years.

From a practical point of view, this means that employees who want to retire in the next 10 years will have to pay bonuses, but may never qualify for the benefits. It also means that retirees who move out of the state are not entitled to the benefits.

What are the benefits of the program?

Services under the program will be available for the first time on January 1, 2025. If they are eligible and the Department of Social and Health Services determines that an individual needs assistance in at least three activities of daily living, the program offers benefits of up to $ 100 per day. up to a maximum lifetime of $ 36,500.

Can employees unsubscribe from the program?

Yes, as detailed in the proposed rules, an employee can opt out of the program and all related taxes and benefits if (1) the employee is at least 18 years old at the time of applying for the exemption and (2) the employee confirms that he or she has another long-term care insurance within the meaning of RCW 48.83.020.

To opt out, a qualified employee must provide ID to verify their age and apply for an exemption from GNI between October 1, 2021 and December 31, 2022 (using a format approved by the GNI) Employee is valid for the quarter immediately after approval. As soon as an employee logs out, he can no longer log in to the program, ie the logout is permanent.

There is nothing in the program to prevent employees from withdrawing their other coverage after approval, but the employee is never eligible for benefits under the program.

When does the employee need long-term care insurance to be able to deregister?

If the program remains in its current form, an employee can take out other qualified insurance at any time before the end of the opt-out exemption period on December 31, 2022. However, Washington legislation is currently considering two possible changes to the program that could shorten this period.

If HB 1323 is passed, only employees who take out another long-term care insurance before the entry into force of HB 1323 (probably July 24, 2021, unless extended by a special session) can benefit from the exemption. While HB 1323 seemed well-positioned to pass, a new amendment introduced by Senator Muzzall aims to extend the deadline to December 31, 2021.

Since it is possible that HB 1323 will be passed and the change that extends the deadline to December 31, 2021 will fail, employees who wish to unsubscribe should assume that they may be subject to a July 24, 2021 deadline and This must therefore find an insurer before that date in order to write a private policy. This is a very short window for taking out long-term care insurance.

How do I know if my employees have opted out of the Washington State Long-Term Care Program?

After an employee’s application for exemption has been processed and approved, they will receive a letter of approval from ESD. The employee must present this letter of approval to his employer. Employers must keep copies of all letters of approval received.

If an exempted employee does not present the letter of approval to his employer, the employer must collect and transfer the premiums from January 1, 2022. An employee is not entitled to reimbursement of premiums collected before or before the employee’s exemption came into effect. The employee sent the approval letter to his employer.

This could affect decisions made at the time of compensation. For example, if an employer knows that a large number of workers have applied for an exemption, the employer may want to take into account that those workers may appreciate late bonuses and stock awards so that those wages are not subject to wage tax.

If an employer deducts premiums after an employee has given the employer their notification of approval, the employer must reimburse the deducted premiums and is responsible for reimbursing the premiums to the employee. The employer is not entitled to reimbursement of ESD premiums.

What happens if an employee moves out of the state?

Because benefits are limited to residents of Washington, employees who move out of the state are not eligible for benefits under the program. Employees who maintain a second home may therefore want to consider which location will be their permanent residence.

Yes, the self-employed are exempt from the program, but can choose to participate. Under the program, self-employed persons must choose coverage by January 1, 2025 or within three years of their first self-employment.

Are collectively negotiated employees exempt from tax?

Contracting parties to a collective agreement existing on October 19, 2017 are only subject to the program if the existing contract is reopened and renegotiated or the existing contract expires. The contracting parties must notify the GNI when the collective agreement becomes open.

Is the ERISA Statute excluded?

May be. Because the program requires employers to maintain an ongoing administrative system that includes a program to provide health, sickness and disability benefits, the program can be excluded from ERISA.

See Washington State’s New Long Term Care Act Is A Mess – Can ERISA Preemption Allow The Cleanup? for more information.