A window to claim a payroll tax exemption that begins in July 2023 is still open, but it will only be open for about two months. It closes on December 31. If you are among those who have private long-term care insurance (LTCI), purchased before November 1, 2021, you will want to jump through the exemption hoops available on the “Exemptions» page of WA cares website.
WA Cares is a mandatory social program created by the Legislature in 2019 to benefit certain Washingtonians who have long-term care needs and their caregivers. Almost all W2 workers will contribute to WA Cares, regardless of income, but only certain people will benefit from the program – again, regardless of income. State legislators have mistakenly created a safety net for people in need and people who don’t. Read my analysis of the long-term care law penalizing labor here.
A “Request Exemption” button is buried on the “Exemptions” page after information about the program, the process surrounding the exemption, a warning that you will be permanently excluded from WA Cares after being exempted, and what the state considers benefits of its program as opposed to private long-term care insurance. It fails to offer you complete information about the differences between the two. This would include that the $36,500 lifetime benefit attached to WA Cares is insufficient for most people’s long-term care needs and lower than what you can find with private LTCI. Staff members and legislators who promote WA Cares continually spread inaccurate information and misleading comments about private LTCIs.
State marketing also fails to mention that many people would rather save for this possible vital need other than a mandatory state savings plan like WA Cares or private LTCI. After all, long-term care might not become a vital need. (Some LTCI plans have options surrounding this possibility.) Some people prefer to pay for long-term care with real estate and other investments or savings.
State lawmakers should repeal the flawed long-term care law and let people plan in the way that works best for them. It should also make changes to Medicaid, preventing abuse of the system. Medicaid is not LTCI, and it shouldn’t be used that way.
This one-size-fits-all state program that will charge workers 58 cents for every $100 earned is not a good investment and offers no guarantee that you will have long-term care benefits. Even if you ever need long term care, if you moved out of state, there will be no money for long term care. If you don’t pay for 10 years without a break of five years or more, you’re out of luck either. WA Cares exclusions and qualifications will keep many Washington workers away from the money they will invest in this program throughout their working years.
Since last October, when the window to apply for the exemption opened, almost 500,000 people have opted out of the payroll tax attesting that they have a private LTCI. Since October 14, the Employment Security Department reports the following:
Total number of unsubscribe requests submitted: 479,711
Total opt-out requests approved: 476,025
Total number of unsubscribe requests processed: 479,624
Requests processed as a percentage of total: 99.98%
New exemption categories created in the last legislative session — including people who live out of state, people on nonimmigrant visas, military spouses, and veterans with related disabilities serving 70% or more – can begin applying for exemptions in January 2023. I am assured by an ESD spokesperson that the exemption team is ready to handle the expected influx of applications.
We’ll know sometime next year how many current workers still have to pay this payroll tax and what the exemptions do to the solvency of the program. Even before a waiver request was approved, WA Cares was unlikely to be able to pay its fees or deliver on its promises. Instead, the payroll tax rate for long-term care should increase or the benefit decrease. It’s no surprise that nearly 500,000 Washingtonians have applied for an exemption.