Will Washington State’s Long-Term Care Tax Spread To Other States?
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Some of our readers in their senior years have been asking questions about long-term care, so I am sharing this new piece of legislation from Washington state that may be of interest to some of our readers. This is the year, 2022, the state of Washington, being the first in the nation to have passed legislation (in 2019) in creating a public long-term care insurance program, is activating this WA LTC Tax on January 1, 2022: all private and public employers with W2 employees in Washington state will be required to collect the new tax (0.58% of the income). Benefits will become available on January 1, 2025. Washington employees may apply for exemption from this payroll tax by having their own long-term care insurance policy in place by November 1, 2021 deadline. Exemption qualifying long-term care insurance policy would have to provide equal or better benefits than the Washington care fund provides. Having a qualified life insurance policy or an annuity that includes supplemental coverage for long-term care expenses also qualifies for exemption. Long-term care insurance includes group and individual annuities and life insurance policies or riders that provides directly or supplement long-term care insurance. To be eligible for benefits, individuals must 1. be a Washington state resident & have paid into the system for 10 years 2. need assistance with at least 3 daily activities (such as medication management, personal hygiene, eating, toiling, cognitive impairment, transfer assistance, body care, bathing, ambulation, mobility, and dressing). 3. they must be receiving care in Washington state currently. There is no cap on the employees’ premium collected, therefore highly compensated employees would be contributing more to this fund based on their earnings. Yet they would only be able to receive the same life time benefit of annual $36,500 indexed for inflation, as for all other employees. Employers do not contribute any of the employees’ premium or to the fund on behalf of the employee. Employers that willfully fail to withhold and remit the full amount of premium when due may be liable for the full premium and interest. Other states such as CA, IL, MI, and MN are also considering creating some type of long-term care fund and finance for the residents.
There are many issues that need to be worked out. Please refer to the video on “WA LTC Tax Update – 8 Potential Changes” at the end of this post.
As Washington State Governor Jay Inslee faces legal action and political opposition, Insee has delayed the payroll tax aimed at funding the state’s first-in-the-nation public long-term care insurance program until April 2022, in the video published on Dec 22, 2021, “Washington State’s New Mandatory Long Term Care Insurance and Tax | Long Term Care Education“, below:
The WA LTC Tax starts on January 1st 2022. The long term care trust act is designed to help the state cover the cost of long term care services. You can opt out of this new payroll tax by having a private LTC policy enforce by November 1st 2021, in the video published on May 6, 2021, “WA LTC Tax – What is it, how it works and how to opt out“, below:
Individuals can avoid a new tax if they purchase private long-term care insurance before Nov. 1, 2021, in the video published on Apr 30, 2021, “Why to consider opting out of Washington state’s Long-Term Care Trust Act“, below:
This Washington legislation is to address the national crisis of aging population that is without sufficient financial resources to pay for the care they need as they age. The financial consequences is not just for individuals themselves but also for state budgets facing ever-increasing spending on Medicaid long-term care. Medicaid spending in state of Washington budget was projected to increase form $1.7 billion in 2015 to $4.1 billion by 2030. It is estimated that, in Washington state there are 800,000 unpaid family caregivers as part of the so-called “sandwich generation” (people who are simultaneously raising children, working, and caring for elderly relatives).
Is this the way of the future for all 50 state residents? Will this decrease mobility of workers? Will this trigger massive migration of the highly compensated young people to move to states that do not collect long-term care payroll tax? What will happen to the Medicare and Medicaid? Much remains to be seen as this experiment plays out in state of Washington.
Gathered, written, and posted by Windermere Sun-Susan Sun Nunamaker More about the community at www.WindermereSun.com
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