On January 27, 2022, Washington Governor Jay Inslee signed House Bills 1732 and 1733, delaying and amending the Washington Cares Act (often referred to as the Long-Term Care premium tax).
Employer Takeaway: The bills delay the obligation to withhold the premiums until July 1, 2023
and instruct employers to refund employees for any premiums already collected within 120 days
of the original withholding.
In theory, the Washington Employee Security Department (ESD) should not have accepted any WA Cares premium payments for the first quarter of 2022. However, if any premiums were remitted to ESD, the amended law instructs ESD to refund the premiums to the employer, who shall then return the premiums to the employee. ESD will send out additional guidance later this month, or you can check their website here
The first time I read the text of the WA Cares Act last summer, my first thought was, “Wow, this is a poorly crafted law.” (Actually, I am pretty certain I used much more colorful language that may have included NSFW vocabulary.) Full disclosure—at the time, I was an Oregon-based employee working for a Washington firm and was personally insulted I would have to pay a tax for a benefit I would never be able to use. Apparently, I was not the only non-resident who had a problem with this idea.
In addition to taxing non-residents who would never be eligible for the benefit, the original law had several other problems: employees could only opt out if they could prove they had other long-term care (LTC) insurance, but because of a rush of new policy activity, the LTC insurance market quickly dried up and nobody could buy private LTC policies; the deadline to acquire private LTC insurance (November 1, 2021) expired before most people heard about the new tax and the option to opt out; individuals near retirement age would have to contribute but never vest for the benefit; and, individuals who would someday want to retire in states other than Washington would not be allowed to take the benefit with them.
In addition to postponing the implementation of the tax, employers should be aware the new amendments broaden the population of employees who can voluntarily opt out:
- Veterans with a service-related disability of 70% or more may qualify for a permanent exemption;
- Spouses or domestic partners of active-duty service members may opt out, though the exemption expires when the service member is discharged or upon dissolution of marriage;
- Employees with a nonimmigrant visa for temporary workers; though the exemption expires if the employee becomes a permanent resident or citizen; and,
- Employees with a permanent primary residence outside of Washington; though the exemption expires if the employee establishes a primary residence in Washington.
Notably, the exemption for employees to opt out by purchasing their own LTC insurance was not extended. Therefore, individuals who were not able to secure a policy prior to November 1, 2021, will not be able to opt out.
Individuals who may be eligible for a future opt out will have to submit an application to Washington’s Employment Security Department (ESD) starting January 1, 2023. Until an employer is provided an approved ESD exemption letter from the employee, the employer should withhold the premiums.
In addition, the law was changed to allow for individuals born before January 1, 1968, to be eligible to receive 10% of the maximum benefit for each full year they have paid premiums. Benefits for all vested individuals will begin July 1, 2026, rather than the originally proposed January 1, 2015.
There may be further amendments to the law in the coming months as the class-action lawsuit filed last fall remains active, and several Washington legislators still favor a complete recall of the Act because several criticisms remain—not the least of which is that a retiree could never move out of Washington and take the benefit with them.
Bullard Law will continue to monitor and provide updates. For further information, contact your Bullard Law attorney.
The content of this Alert is provided for general information purposes only. It should not be considered legal advice or used as a substitute for consulting an attorney for legal advice.
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