New Washington Payroll Deduction funds Long-Term Care
Beginning January 2022, Washington workers will start contributing to a long-term care fund that will provide care benefits as they age. After contributing no more than 0.58% of their paycheck for a minimum of ten years, taxpayers will be eligible for up to $36,500 in long-term health care support, including home health, home modifications, meal delivery, residential care, nursing home care, or other support.
The WA Cares Fund requires taxpayers to contribute to their fund or purchase private insurance. Contributions will be automatically deducted from employee wages starting in 2022. Taxpayers may access their funds as soon as 2025 for a range of services to support their long-term care needs. Washington residents should consider that this payroll tax is separate from retirement savings and is a dedicated fund for later-in-life elder care.
Contribution Requirements + Eligibility
To qualify for the WA Cares Fund, Washington residents must have:
- Worked and contributed to the fund for at least ten years without a break of five or more years or
- Worked and contributed for three of the last six years when applying and
- Worked at least 500 hours per year during contributing years.
Self-employed individuals are also eligible to opt-in to the program. Qualifying wages for the Paid Family and Medical Leave will always qualify for the WA Cares Fund. Newly self-employed individuals will have three years to opt into the program.
When benefits are available in 2025, participants must apply and require assistance with at least three daily living activities, including medication management, personal hygiene, eating, toileting, cognitive function, transfer assistance, body care, ambulation, or dressing.
Individuals must apply for an exemption between October 1 and December 31. 2021. The permanent exemption is only available for individuals who have purchased qualifying private insurance by November 1, 2021. This is a permanent exemption for those not interested in contributing to the WA Cares Fund and would rather have private insurance. After receiving approval from the Washington State Department of Social and Health Services, employees must submit the notice to their employer. The application will be available on October 1, 2021 from the Employment Security Department.
While this is not an employer tax, organizations may need to update their payroll system to ensure compliance. Starting in January, the payroll process must include a tax deduction from most W-2 employees and not for those who are exempt. In addition, employers are required to collect and pay premiums every quarter and may use the same process used for Paid Leave.
Businesses should consider notifying their employees of the change and offering additional communication. Those offering comparable private long-term care insurance should plan to help employees seek exemption and ensure they understand associated ramifications in the future.
Aldrich is Here to Help
With more information coming this fall, our team of experts is carefully monitoring the Department of Health and Social Services for updates and changes. As new guidance is available, we’ll continue to provide recommendations and keep you apprised of the evolving legislative landscape. If you have questions about accommodating the WA Cares Fund as part of your payroll process, reach out to your Aldrich Advisor.
Meet the Author
Sara Northcutt, CPA
Aldrich CPAs + Advisors LLP
Sara Northcutt joined the firm in 2005 and has more than a decade of experience working on a wide range of clients, including financial lending, private equity, real estate, and other closely held businesses. Sara specializes in multi-state tax compliance. Sara received her Bachelor of Arts degree from Vanguard University of Southern California and did her... Read more Sara Northcutt, CPA
- Closely-held businesses
- Certified Public Accountant
- Strategic tax planning and compliance