Insights 10/11/21

Dear RMI Client,

As you’re likely aware by now, the new Washington Long-Term Care Tax mandates a tax on employee’s wages ($0.58 on every $100 of wages ) to pay for long-term care benefits for Washington residents.  The tax and premium collections will start January 1, 2022.

What Is The Washington Long-Term Care Program?

The Washington Long-Term Care Program is the first state-operated long term care insurance program in the country. Employers must collect the employee premiums through after-tax payroll contributions and then remit those premiums to the Washington State Employment Security Department (ESD). Employers are not required to contribute to the Program, but they must remit the employee-paid premiums.

There Is No Cap on the Amount of Taxed Wages

Unlike other state insurance programs, there is no cap on wages. All wages and other compensation, including stock-based compensation, bonuses, paid-time off, and severance pay, are subject to the tax. For example, an employee with wages of $75,000 will pay $435 toward the Program each year while an employee with wages of $300,000 will pay $1,740 yearly toward the Program.

Which Employees Are Subject to This Tax?

All employees in Washington must pay taxes into the Program, with the exception of self-employed individuals, employees of a federally recognized tribe, certain collectively bargained employees, and employees who qualify for an exemption (see below).

The Program says an employee is treated as employed in Washington if the employee’s service is performed in Washington or, if the service is not performed in any state, then if the employee performs some services in Washington and the services are directed or controlled from Washington. This definition is like the Washington Paid Family and Medical Leave Program.

Who Is Eligible to Receive Benefits?

Benefits are limited to Washington residents who have paid premiums 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 application for benefits is made. Also, to qualify, an employee must have worked at least 500 hours during each of the 10 years or each of three years, as applicable.

What Are the Benefits Under the Program?

Benefits under the Program will become available January 1, 2025. If eligible, and if the Department of Social and Health Services determines that an individual needs help with at least Three Activities of Daily Living, the Program pays benefits up to $100 per day, with a lifetime limit of $36,500.

Can Employees Opt Out of the Program?

Yes, an employee may opt out of the Program and its taxes and benefits if:

  • The employee is 18 years old or older on the date he or she applies for the exemption, and
  • The employee attests that he or she has other long-term care insurance.

To opt out, the employee must provide identification to verify his or her age and must apply for an exemption with ESD between October 1, 2021, and December 31, 2022. If approved, an employee’s exemption will be effective for the quarter immediately following approval. Once an employee opts out, however, the employee cannot opt back into the Program. The opt-out is permanentAnd, as you can see, the period of time to opt-out is very short.

How Will Opting Out of the Program Work with RMI?

At this time, you will need to file for an exemption with the state.  This is the only way to avoid the state mandated policy.  As soon as the RMI Center is able to process these requests, we will let you know.  For now, though, you can find more information and apply for you exemption here: