Washington CARES LTC Fund Deductions Begin July 1, 2023

As we previously reported last year, legislation was passed to delay the implementation of the Washington CARES Long-Term Care Fund (WA CARES). This action postponed the start date for employers to collect WA CARES payroll deductions from Washington-based employees to July 1, 2023 (the date was originally scheduled for January 1, 2023).

Although additional changes to WA CARES may still come before July 1, 2023, employers are advised to begin preparations now for these new payroll deductions. Please review the timeline below and read on for more details.

WA CARES Timeline

WA CARES Background

WA CARES was enacted in 2019 and is the nation’s first mandatory, state-administered long-term care insurance (LTC) program for workers. It is intended to operate similarly to Social Security benefits, where all workers participate in the program funding and earn coverage over the course of their working years.

Covered Employers

Employers are required to deduct WA CARES contributions from their employees working in Washington state.

Employers are not required to contribute to the program as WA CARES is solely funded by employee wage deductions. However, employers may choose to contribute to WA CARES on behalf of their employees in Washington.

Covered Employees

Under WA CARES, employees are considered employed in Washington if their work is localized in Washington. If an employee’s work is not localized in any state, but performs some services in Washington and the services are directed or controlled from Washington, then the employee is covered under WA CARES.^[1]

The following employees are not subject to WA CARES:

• Self-employed individuals: they can opt into the WA CARES program by applying to the Washington State Employment Security Department (WA ESD) on or after July 1, 2023.
• Federal government employees, including active duty military employees in certain instances.
• Employees who purchased private LTC insurance on or before Nov. 1, 2021: they were able to apply for a permanent exemption from the WA CARES from Oct. 1, 2021, until Dec. 31, 2022, and should have received their exemption letter from the WA ESD.
• Employees of federal tribes unless the tribe opts into the program.
• Certain employees covered under a collective bargaining agreement.

Payroll Deductions & Benefits

The WA CARES payroll deduction tax is 0.58% of employee wages, not subject to a cap. Employers are required to withhold these deductions beginning July 1, 2023, and remit them to a state-run trust to fund LTC benefits.

All Washington taxpayers who have contributed to the program for 10 years are eligible to receive the benefit of LTC care services and supports costing up to $36,500 over their lifetime.

WA CARES Exemptions Effective January 1, 2023

As of January 1, 2023, the following workers in Washington are permitted to seek exemptions from WA ESD and the exemption application website can be accessed here:

• Veterans with a service-connected disability of 70% or higher, as rated by the U.S. Department of Veterans Affairs.
• Spouses or registered domestic partners of an active duty service member: This exemption expires when the active duty service member is discharged from military service or the marriage/registered domestic partnership ends.
• Non-state residents working in state: This exemption expires upon the non-resident worker establishing a permanent address/primary location within Washington state.
• Workers with a nonimmigrant, temporary worker visa: This exemption expires upon the temporary worker becoming a permanent resident or citizen.

If approved, these employees must provide written notification to the current and future employers of their WA ESD exemption letter. Their WA CARES contributions will terminate on the first day of the quarter following their exemption approval.

Except for veterans with a 70% service-connected disability (considered a permanent exemption), workers outlined directly above must notify their employer and the WA ESD within 90 days of the expiration of their exemption status. Failure to do so will result in the payment of unpaid WA CARES contributions with interest of 1% per month to the WA ESD.

Partial Benefits for Certain Workers

Employees in Washington born before 1968 and who do not meet the 10-year minimum for WA CARES contributions may receive a prorated 10% benefit available for each full year they contribute.

Benefit Availability Date

WA CARES benefits will be available for qualified, eligible individuals on July 1, 2026, rather than the original January 1, 2025 effective date.

Next Steps for Employers

The WA ESD created a helpful employer toolkit with WA CARES-related materials that can be accessed here.

As this July 1, 2023 start date for WA CARES payroll deductions approaches, employers are advised to:

1. Begin preparing for this new payroll deduction with their payroll providers.
2. Establish a process to terminate payroll deductions for employees who provide notice of an approved WA CARES exemption from the WA ESD.
3. Notify employees in Washington that they will see a new WA CARES-related payroll deduction in their first paycheck received after July 1, 2023 (unless an employee provides notice of an approved exemption).

Risk Strategies is closely following these developments and will provide updates when available. Reach out to your Risk Strategies representative with questions or contact us at benefits@risk-strategies.com.

[1] WA CARES definition of "employment" mirrors that of the Washington Paid Family and Medical Leave (PFML) program. As a result, employees covered under WA PFML are also covered under WA CARES.