On April 21, 2021, Washington Gov. Jay Inslee signed into law the Long-Term Services and Supports (LTSS) Trust Act, establishing the WA Cares Fund. The intent is to provide eligible workers who need long-term care (LTC) services a resource for benefits. The fund will be financed via employee taxes scheduled to begin collection on January 1, 2022.
However, many individuals who already have LTC benefits through a private insurer or corporate policy may not need this secondary coverage. In those cases, paying into the fund would provide little personal value.
Thankfully, the LTSS Trust Act allows for a one-time window to permanently opt out of the taxation. In this article, we’ll examine both the requirements and consequences of opting out, and outline the process for doing so.
Who Is Affected?
Anyone who is currently employed in the state of Washington will be subject to pay a .58 percent premium on all earnings starting January 2022. The levy will be automatically deducted from your paycheck, along with your other taxes, unless you opt out using the process outlined below.
The Choice to Opt Out Is Permanent
According to the WA Cares Fund webpage on private insurance and exemptions: “If you apply and are approved for an exemption, you’ll be permanently disqualified from WA Cares Fund. This means you may never re-enroll and you’ll be prohibited from getting WA Cares benefits, even if you need them.”
To get an exemption, you need to create an account and apply to opt out of the WA Cares payroll tax and WA Cares Fund.
Opt-Out Requirements
According to the WA Cares Fund webpage referenced above, to apply for a permanent exemption, you must:
• Have purchased a qualifying private long-term care insurance plan before November 1, 2021
• Be at least 18 years old
• Submit an exemption application to the Employment Security Department (ESD)
The ESD will accept exemption applications through December 31, 2022
You can begin the opt-out process by visiting https://secureaccess.wa.gov/. The ESD will review your application and notify you if you’re eligible for an exemption.
If Your Application Is Approved
According to the WA Cares Fund private insurance webpage, the ESD will send you an exemption approval letter. At that point, you will be:
• Exempt from the program and cannot re-enroll
• Barred from ever drawing WA Cares benefits
• Required to present your exemption approval letter to current and future employers
Your exemption will begin in the quarter after the ESD approves your application.
When Opting Out Can Help
While the WA Cares Fund offers a glimmer of hope to those not otherwise covered for LTC benefits, it may feel like a strain to many others.
This is particularly true for those in higher income brackets whose contribution to the fund will be considerably greater. After all, no matter the amount a worker contributes, the end benefit limitations remain the same.
This opportunity to opt out, therefore, is a winning strategy to reduce the overall tax burden for those with LTC benefits in place. Acting quickly, however, is crucial.
Washington received a startling number of exemption applications during the first week of the exemption window, indicating the potential for a processing backlog down the road.
If you are unsure about the right decision for you, consider talking with a financial advisor. Our fiduciary financial planning firm in Spokane advises clients on the WA Cares Fund and long-term care insurance in general as part of their comprehensive planning.
Schedule a complimentary insight meeting to discuss your situation and how we may be able to help.
