The problem? Few have access to affordable coverage for those costs.
In late April, Washington State lawmakers signed off on the country’s first public long-term care program. Under the new law, qualifying individuals will be able to use public funds for in-home caregiving, respite care, assisted living facility fees, and even certain home renovations—like adding a wheelchair ramp or stair lift.
The historic program will be funded entirely through a new employee payroll tax. Let’s cover what that means for HR and payroll administrators in the Evergreen State.
New Tax, New Rules
So how does the new tax work? Starting January 1, 2022, Washington State employers will begin withholding the tax from employee pay. Employees will begin to see this deduction on each paycheck. The amount they can expect to see is 0.58 percent assessment on wages—or in other words, 58 cents per hundred dollars.
If an employee has an annual salary of $52,000 and makes $1,000 per week, they would pay $5.80 weekly towards the state’s long-term trust program. Currently, there is no limit in place for this assessment—so unlike Social Security, the tax would continue regardless of annual income.
It’s worth noting that a wage limit could be placed on this tax ahead of 2022. Why? Anyone who taps into the fund will be allowed up to a one-time amount of $36,500. If that’s the maximum amount a person will ever be allowed, someone making a modest $7 million a year will already pay into the tax $40,600, or roughly $4,100 over an amount they could ever reclaim.
Keep in mind that if an employee is crossing the border from Oregon or Idaho to work in Washington, they will still be susceptible to the tax. However, unless they become residents of Washington, they will not be eligible to collect. And before you plan to move to Washington after retirement with hopes of collecting, the funds are only available to those who have paid into them.
Could Washington's new law inspire other states to follow suit? Multistate employers should note that a number of jurisdictions are currently weighing long-term care proposals. In the last year, Minnesota, Maine, California, and New York have all either introduced or deliberated over similar measures in their state legislatures. Hawaii has also considered expanding their already generous program, which was enacted in 2017.
The Namely team will continue to monitor the status of state and local long-term care proposals.