Washington state passed the Long Term Care (LTC) Services and Supports act in 2019. This bill quickly became known as the “LTC payroll tax law” as it requires WA workers to pay a tax of .58 percent on W-2 payroll amounts to fund LTC benefit payments. Employers do not pay the tax; it is funded by the employees via a payroll tax.
Which employers must comply: Employers with employees working in Washington state, including those working remotely from their home in the state of WA.
There are exceptions which generally include federal employers, union employees (limited) and federally recognized tribes.
What is it? Employers must ensure payroll tax is set up for WA LTC benefits in the amount of .58 percent with no cap on wages. Contact your payroll vendor for assistance.
Employers will collect premiums the same way as they do for WA Paid Leave.
Which employees have to pay the tax? Employees who work in Washington, receive wages reported on a Form W-2, and work at least 500 hours per year.
Individuals who have private long-term care insurance purchased prior to Nov. 1, 2021 may apply to WA Employment Security Department (ESD) for an exemption of the payroll tax. If approved, the employee must notify the employer by providing the employer with a copy of their approval letter.
What if my employee lives in WA, but works at a location outside of WA state? In this instance, the employee would not be subject to the WA LTC payroll tax nor would they be eligible for the benefit.
What if my organization already offers private LTC? Your company can continue to offer private LTC to eligible workers. However, it is the employee’s responsibility to decide whether to apply for an exemption.
Does an employer have to set up the payroll tax for a 1099 employee? No. These individuals may opt-in on their own starting January 2022.
When is it effective? The payroll tax must be in effect starting January 1, 2022.
What prompted this new LTC payroll tax for Washington workers? The proceeds of this payroll tax will be used to provide long-term services and support benefits to Washington state workers who have paid into the Long-term Services and Supports Trust Program (LTSS) for a specific amount of time and who need a certain amount of assistance with activities of daily living. The tax begins in January 2022; however, the earliest benefits can begin will be on January 1, 2025.
For more information, visit http://www.wacaresfund.wa.gov/. The website provides an employer toolkit, communication templates for workers, an employer newsletter and more.