Washington State Long Term Care Tax: Another Hurdle Passed
Updated: Jul 7
In 2019, Washington debuted a pilot program to pay individuals who receive home care services a lifetime maximum benefit of about $36,500 to assist with activities of daily living like in-home care, transportation, and other relevant needs.
In order to cover this amount of money, they intend to impose a tax of 0.58% on employees’ earnings in the state. This means an employee with a $70,000 annual salary will be imposed a tax of $406. This was scheduled to begin in July 2023.
While many people support Washington's initiative, and other states are even considering replicating the program, some businesses in Washington still are against it. There have even been a few lawsuits filed against the pilot program.
In November 2021, six individuals and three businesses combined to file a new federal lawsuit against the WA Cares Fund.
The lawsuit stated many things, including alleging that the WA Cares Fund violates several federal laws, including one that forbids a state from making a law that mandates workers to be part of plans that offer medical benefits. The lawsuit also stated that the WA initiative violates the U.S Constitution's Equal Protection right since every worker is mandated to pay the tax. Still, non-residents of Washington are not entitled to any benefits.
This lawsuit caused lawmakers to delay making further recommendations to address the various issues raised about the program.
However, Judge Thomas Zilly of the U.S. District Court for the Western District of Washington repudiated all arguments during a ruling, disclosing that his court was a federal court and had no jurisdiction. He stated that all lawsuits about the WA Cares should be filed in a state court.
Richard Birmingham, an attorney with the litigants, stated that getting to a state court is unlikely to happen anytime soon. He says, “Any state law challenge we may pursue will likely wait until July 1, 2023, the next date by which premium is scheduled to be collected.”
Ben Veghte, the Fund Director of WA Cares, expressed his appreciation for Judge Zilly’s ruling. In his words, "This decision is another step toward making long-term care accessible for all Washingtonians and setting an example for the rest of the nation to follow."
The most prominent complaint from opponents and supporters of WA Cares is that every worker will be mandated to pay the tax even though not all that pay will be eligible to receive the benefits.
Following these complaints, democrats found a way to delay WA Cares, which should have begun on January 1, 2022.
Some changes have been made to WA Cares. In the new law, people who pay for the program but are not eligible for the benefits will be allowed to opt-out. This will include people who reside in other states but work in Washington - about 150,000 in total.
Also, according to the original law passed in 2019, some state residents close to retirement age might not have been fully eligible to receive full benefits. The revised law allows residents of Washington who are not fully eligible to receive partial benefits, depending on the number of years that the individual pays into the WA Cares Fund.
Following these changes, Jay Inslee signed a bill delaying WA Cares until July 2023, allowing legislators time to make revisions and address various issues that have caused Democrats to reconsider their game-changing proposal. WA Cares would be the country's first program of its sort.
The Voluntary Benefits Shop will continue to watch these developments. And remember, because of our carrier relationships, our clients get much higher levels of guaranteed issue long-term care coverage than they would if they tried to arrange these plans independently. Contact us today to learn more about his valuable benefit.