Planning matters

Washington’s New Long Term Care Trust Act

Hey W-2 income earners in the Washington…

In case you haven’t heard there’s a new law and it has to do with long term care insurance! Washington recently became the first state in the nation to create a publicly funded, state-operated long term care insurance program.

Although five other states are developing similar programs, Washington will be the first to enact The Long Term Care Trust Act when it goes into effect on Jan. 1, 2022. What does this mean to you as a Washington citizen? We’ve compiled some FAQs on the matter.

What is the Washington Long-Term Care Program?

It’s a law mandating long-term care benefits for Washington residents, paid for by a tax on employee’s wages.

Who funds the program?

The program is funded by Washington workers who will pay the tax through payroll deductions.  All compensation reported on a W-2 will be taxed, including bonuses, paid time off, severance pay, and stock-based compensation. Self-employed individuals are not required to contribute to the program, but can elect coverage voluntarily.  The initial rate is .58% or 58 cents per $100 of W-2 income. The tax rate will be reset on Jan. 1, 2024 and re-assessed every two years after.

What does the program offer?

The program will eventually help participants who need assistance with performing daily activities (called ADLs) such as eating, bathing and dressing. The daily benefit is $100 per day or a maximum lifetime benefit of $36,500, or roughly one year of coverage. Benefits won’t be available for approved services until Jan. 1, 2025. Benefits are not available to:

  • Employees who were already retired before the implementation of the program.
  • Employees who are not residing in Washington when they become qualified to receive benefits.
  • Employees who are not vested in the program.

What if I already have long term care insurance? Can I opt out?

W-2 income earners can apply for an exception to the tax, but they must have their own personal long term care policy, which can include a policy provided by an employer. The coverage must be as good as the state program coverage or better. Personal coverage must be in force by Nov. 1, 2021 to be eligible for the opt out. The time frame to apply for an exception is from Oct. 1, 2021 through Dec. 31, 2022. Once you receive an exemption from the Employment Security Department, it is your responsibility to provide written notification to your current (and future) employers.

Does my current policy qualify me for the “opt-out” feature?

If your long-term care policy covers you for at least a $100 day benefit, and a pool equal to or greater than $36,500, then it qualifies. The types of coverage can be:

  • Traditional Long Term Care policies (individual or shared with spouse)
  • Life or Annuity Contracts with Long Term Care Riders (Hybrid policies)
  • Group coverage through an employer

If you are interested in obtaining your own long term care coverage, we can help. We will design a policy that works best for you and qualifies for the “opt out.” The Nov. 1 deadline will come quickly, so a policy should be put in place sooner rather than later. The process can take on average, approximately a month from start to finish.

I’m happy to answer questions you may have. Just call the office and ask for me!

Written By Jeri Boston