Washington state delays new long-term care payroll tax, Inslee says

Gov. Inslee delays long-term care payroll tax

The start of the payroll tax for all Washingtonians will begin in 2023 after Gov. Jay Inslee and law makers take another look at the tax and make modifications.

OLYMPIA, Wash. - Washington Gov. Jay Inslee said Friday that the state is delaying the start of a mandatory payroll tax to fund Washington state’s new long-term care program.

Inslee and Washington Democratic legislative leaders announced an agreement to push back the new WA Cares payroll levy as they address issues with the new long-term care program.

During the pause, employers won’t incur penalties and interest for not withholding those taxes from worker wages, he added.

"I have been in ongoing discussions with legislators about the long-term care bill, which is set to begin collecting funds in January. This bill will help provide much-needed care and coverage for Washingtonians as they age. However, legislators have identified some areas that need adjustments and I agree. We need to give legislators the opportunity to make refinements to the bill," said Gov. Jay Inslee. "Therefore, I am taking measures within my authority and ordering the state Employment Security Department not to collect the premiums from this program from employers before they come due in April."

Senators Andy Billig and Speaker Laurie Jenkins released a statement saying that the Washington Cares Fund premium assessment will be delayed through the 2023 legislative session:

"The legislature has the opportunity to delay the Cares Fund premium assessment this year in order to make improvements to the Fund during the 2022 legislative session and we fully intend to do so. Pausing the program so that it can better serve disabled veterans, military spouses, non-residents, and near retirees will improve the program. A pause will also give the Long Term Care Commission the ability to study and make recommendations about residents who move out of Washington to retire and assure that those who have opted out of the program maintain their private insurance policies. These improvements will provide security and stability now and into the future for this critical safety net for our state’s seniors and people with disabilities."

Under the law, which was passed in 2019, workers will pay a premium of .58% of total pay per paycheck, meaning an employee with a salary of $50,000 will pay $290 a year. Starting Jan. 1, 2025, people who need assistance with at least three "activities of daily living" such as bathing, dressing or administration of medication, can tap into the fund to pay for things like in-home care, home modifications like a wheelchair ramp and rides to the doctor.

The benefit also covers home-delivered meals, and reimbursement to unpaid family caregivers. The lifetime maximum of the benefit is $36,500, with annual increases to be determined based on inflation.

Supporters of the program decried any effort to delay the program.

"Delaying WA Cares would harm an estimated 38,000 disabled, elderly, or seriously ill people who are desperate for long-term care benefits in 2025," Jessica Gomez with the coalition Washingtonians for a Responsible Future, said in a written statement.

According to AARP of Washington, 70% of residents 65 and older will require some type of assistance to live independently.

Gomez also said the delay would create confusion for those who bought private long-term care insurance this year by a Nov. 1, deadline in order to opt out of the tax.

As of Dec. 2, the Employment Security Department had received more than 430,000 applications for an exemption, and more than 334,000 had been approved thus far.

The high number of exemptions has raised concerns about the viability of the program, and the potential of a premium increase for workers.

"If the long-term solvency is in doubt, we must be able to examine all options for modifying the program to ensure viability into the future," the Democratic senators wrote.

To be eligible for the state benefits, workers will have had to have paid the premium working at least 500 hours per year for three of the previous six years in which they’re seeking the benefit or for a total of 10 years, with at least five of those paid without interruption.

The benefit is not portable, so people who pay into the program but later move out of state will not be able to access it, and it only covers the taxpayer, not a spouse or dependent. The benefit also isn’t available to those who work in Washington and will pay the deduction but live in neighboring states, like Oregon.

Last month, a class action lawsuit was filed with the federal court for the Western District of Washington on behalf of three businesses in the state and six individuals opposed to the payroll tax.

Democratic House Majority Leader Pat Sullivan said leaders in the House are already looking at changes to elements of the program, including portability and border state residents.

"A delay would give us more time to address some of those issues that have been raised," he said.

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