What You Need to Know About the Washington Long-Term Care Trust Act

If you are not yet aware of the Washington Long-Term Care Trust Act, buckle up.

The Washington Long-Term Care Trust Act is effective as of January 1, 2022 and is funded by a mandatory 0.58% payroll tax on all employee wages, including stock-based compensation, bonuses, and paid time off.  There is no cap on wages.  To put this in perspective, if you make $75,000 per year you will be required to pay $435 into this program.  If you make $200,000, $1160 is coming out of your paycheck for the program.

All employees in Washington are required to pay into this program except self-employed individuals, employees of a federally recognized tribe, along with some other exempt groups.

Benefits from this program are payable starting in 2025, paid out at a maximum of $100 per day with a lifetime maximum of $36,500.  You can only get those benefits if you have paid premiums into 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. In addition, to qualify, an employee must have worked at least 500 hours during each of the 10 years or each of three years, as applicable.”

You also must be a Washington resident to collect benefits, so if you’re planning to move out of the state after retirement, this affects you.

There is only one way to opt out of this program – you must have purchased your own qualifying long-term care insurance before November 1, 2021.  Then, you have to submit your attestation for review between October 1, 2021 and December 31, 2022.  If approved, you are permanently exempt from both the payroll deductions and the future benefit.  Washington generally defines long term care insurance as one of the following:

·       Non-Tax-Qualified (NTQ) and Grandfathered LTC Insurance

·       Tax-Qualified (TQ) LTC Insurance

·       Partnership LTC insurance

·       Group LTC Insurance (if Tax-Qualified)

·       Life insurance riders which meet 7702B(b) criteria

·       Life insurance policies and annuities which "provide directly or supplement" LTC insurance

*Your specific policy will be reviewed and is subject to approval by the Employment Security Department for opting out.  Approval is not guaranteed.*

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.