September 21, 2021

Volume XI, Number 264

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September 21, 2021

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September 20, 2021

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Washington’s New Long-term Care Benefit Program: Important Deadlines Loom!

In 2021, Washington established a long-term care benefit program for Washington workers called the WA Cares Fund. In short, the program implements a mandatory 0.58 percent payroll deduction on employee wages to create a state trust fund, which, beginning in 2025, will be used to fund certain long-term care costs for eligible Washington workers. Each eligible Washington worker is entitled to a lifetime benefit of up to $36,500, which will be adjusted annually for inflation. The regulatory scheme implementing the program is still being developed, and we will update the below information on our Washington blog about the program as the regulatory rules are finalized and implemented.

Key elements of the program include the following:

How much must workers contribute?

Under the program, employers must deduct a payroll tax equal to 0.58 percent of worker wages each pay period (wages x 0.0058).

For example:

  • Workers earning $50,000 contribute $290/year.

  • Workers earning $75,000 contribute $435/year.

  • Workers earning $100,000 contribute $580/year.

  • Workers earning $150,000 contribute $870/year.

  • Workers earning $200,000 contribute $1,160/year.

For high-wage workers, contributions are not capped. The program taxes all wages and compensation, including bonuses, gifts, severance payments, and stock-based compensation. Tips are not included in wages.

Do employers contribute?

Employers are not required to contribute to the program. However, employers may decide to pay their employees’ WA Cares Fund premiums.

When do deductions begin?

Employers must collect deductions for participating workers beginning January 1, 2022, and remit those premiums to the Employment Security Department on a quarterly basis.

Which workers are included?

 

 

All Washington workers are included, unless:

  • the worker is self-employed (i.e., sole proprietor, member of a partnership, member of a limited liability company, independent contractor, or other self-employed status);

  • the worker is subject to an existing collective bargaining agreement (CBA) that was in effect on October 19, 2017; or

  • the worker opts out of the program.

Note: Once exempted CBA agreements are reopened, renegotiated, or expire, workers to which the CBA applies will be subject to the program.

How are remote workers treated?

Employers must withhold premiums for workers whose work is “localized” in Washington, which includes employees who perform all or most of their work within Washington.

If only some of an employee’s work is performed in Washington, employers may still be required to implement the payroll tax for the worker based on several factors (such as the base of operations, the location where the services are directed or controlled, and the employee’s residence).

May self-employed workers opt in to the program?

Self-employed workers are not required to participate in the program, but may opt in to the program through an application.

What benefits does the program provide?

Program participants receive $36,500 in lifetime benefits, adjusted annually for inflation.

An eligible participant may use program funds for:

  • Memory care;

  • Adaptive equipment and technology;

  • Home modifications, e.g., access ramps;

  • Home safety evaluation;

  • Meal delivery;

  • Transportation;

  • Personal care in a home;

  • Assisted living facility;

  • Adult family home or nursing home;

  • Training and support for family caregivers; and

  • Other qualified long-term care needs.

When do benefits begin?

Eligible workers may apply for, and receive, benefits beginning January 1, 2025.

Who is eligible for benefits?

The Washington State Department of Social and Health Services determines eligibility. To be eligible, workers must: (1) be vested in the program, and (2) need help with at least three activities of daily living.

 

  • Workers are vested if they have worked:

  • a total of 10 years without interruption of 5 or more consecutive years; or

  • 3 years within the last 6 years of the date of application.

Note: A “year” is one in which the individual worked at least 500 hours.

Who may consider opting out?

Several categories of employees may consider opting out of the program, including the following:

  1. Workers with upward wage trajectory

  2. High-wage workers

  3. Retirement-ready workers

Workers who expect to retire before they vest in the program may contribute to the program before they have an opportunity to receive benefits.

  1. Workers with plans to move out of Washington

Benefits are limited to Washington residents. Therefore, workers and/or retirees who move out of Washington will not qualify for benefits.

  1. Workers with existing long-term care coverage

  2. Workers who want to customize their coverage

How do workers opt out?

Workers who are over the age of 18 may take the following steps to opt out of the program:

 

Step 1. By November 1, 2021, purchase qualifying private long-term care insurance.

Step 2. Between October 1, 2021, and December 22, 2022, apply for a program exemption by submitting an application to the Washington Employment Security Department (ESD) which attests that the worker obtained a qualifying long-term care policy prior to November 1, 2021.

Approved exemptions are not effective until the quarter immediately following approval. For example, if the ESD approves a worker exemption on January 1, 2022, the worker’s wages will be taxed through March 31, 2022. In other words, end-of-year bonuses or commission payments often paid in the first quarter will be reduced by the program payroll deduction.

Step 3. Submit the ESD approval letter to their employer.

Is opting out permanent?

Once a worker opts out, there is no way to opt back into the state program. It is not yet clear whether a worker may drop private long-term care coverage after permanently opting out of the state benefit.

What are the employer’s duties under the program?

The employer has five primary duties:

 

  1. Deduct premiums.

  2. Maintain copies of the ESD exemption letters submitted by workers.

  3. Remit quarterly premium payments to the ESD.

  4. Submit quarterly reports to the ESD, which are expected to be consistent with reports employers already provide under the Washington Paid Family and Medical Leave Program.

  5. Inform the ESD immediately upon reopening, renegotiation, or expiration of a CBA that was in effect prior to October 19, 2017.

The current law and draft regulations do not require employers to provide advance notice to employees about the program, their ability to opt out or become exempt from the program, or that deductions will begin on January 1, 2022.

Washington is expected to provide additional clarification to the WA Cares Fund through regulations, and legal challenges to the program are expected under preemption grounds under the Employee Retirement Income Security Act.

© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume XI, Number 229
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About this Author

Adam Pankratz, Ogletree Deakins Law Firm, Labor and Employment Litigation Attorney
Shareholder

Mr. Pankratz represents corporations and management in a myriad of employment-related and complex commercial matters, including litigation involving discrimination, retaliation, harassment, wage and hour, wrongful termination, ADA and FMLA leave issues, and other matters in state and federal courts and administrative agencies. Mr. Pankratz has experience successfully representing employers in executive termination, non-compete and unfair competition disputes.  Mr. Pankratz has extensive experience representing employers both locally and nationally on various employment...

206-693-7053
Associate

Kyle is an advisor and employment litigator in Ogletree Deakins' Seattle office. He represents employers in state and federal courts, as well as before administrative agencies.

Kyle has experience handling employers against alleged claims for discrimination, harassment, retaliation, constructive discharge, and wrongful termination. 

Kyle also has experience in employee non-compete, non-disclosure, non-solicitation, and misappropriation of trade secret claims. Prior to joining Ogletree Deakins, Kyle practiced at a...

206-693-7057
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