What You Need to Know About Washington’s New Long-Term Care Act

by Jenny Ling, Esq.

You may have heard that Washington State has passed a new law mandating public long-term care (LTC) benefits for Washington residents.  The Long-Term Care Act was created to reduce pressure on the Medicaid system and will be paid for by a 0.58% tax on employee compensation.  While this program may be appropriate for many Washington State residents, such as those with average income and/or health conditions that prohibit private coverage, it may not be advantageous for you based on your individual situation.

A few important things to know about this new law:

• Under current law, you have one opportunity to opt out of this tax by having a long-term care insurance policy in place by November 1, 2021 and submitting a form to notify the state of that policy. 
• All employee compensation is subject to this 0.58% tax.  This includes your salary, bonuses, and company stock (such as restricted stock units) with no income cap.
• You will pay $580 of additional tax per every $100,000 of compensation with no income cap.
• The benefits of this LTC are capped $100 a day, with a maximum benefit of $36,500 over your lifetime.
• As of right now, persons who do not opt out of the LTC coverage may not withdraw from the Trust Program: taxes must continue to be paid until retirement.
• In order to be eligible for the benefit, you must be a Washington resident, age 18 or older and have paid the payroll tax for either 10 years without interruption of five consecutive years, or three of the last six years, and work at least 500 hours a year.
• Limited exceptions include:
  • Self-employed individuals (unless they elect otherwise);
  • Employees of federal tribes (unless the tribe elects otherwise) or the federal government;
  • Employees subject to a collective bargaining agreement in existence as of October 19, 2017, unless and until such agreement is reopened, renegotiated, or expired.
• You can only collect these benefits if you receive care in Washington State. Those who plan to move away will not receive any benefits and would receive far greater value by buying their own policy that can be used for LTC expenses in any state they choose to live in retirement.
• If you never use the benefit, there is no refund to your estate

You should speak to a qualified financial advisor to determine if you should purchase your own Long Term Care insurance policy or if the state’s policy is the best choice for you.  If you don’t have a financial advisor, give us a call and we can help you find the right fit for you and your family.

Jenny Ling is a partner at the Law Offices of Jenny Ling, PLLC.  She focuses her practices on estate planning, business succession planning, business and bankruptcy.