Washington is the first state in the country to mandate a tax on workers that will be used to fund a state-run long-term care insurance program.
In April, Governor Jay Inslee signed the Long-Term Services and Supports Trust Act into law to address the future long-term care crisis. The law establishes the WA Cares Fund, which will be used to pay for long-term care services for qualified workers starting January 1, 2025.
Who Is Subject to the Washington LTSS Tax?
The program is funded by employee premiums via a mandatory payroll deduction equal to 0.58% of employees’ wages that takes effect January 1, 2022.
All employees working in the state of Washington at least 500 hours per year are subject to the tax but can apply for an exemption if they demonstrate that they have long-term care insurance purchased before November 1, 2021. Employees must present a waiver from the Employment Security Department to their employer in order to be exempt from the withholding. Workers who do not receive Form W-2 are not subject to the tax.
What Are Employers Required to Do?
Employers are not required to contribute to the program, though they are required to collect premiums each pay period through payroll withholding. Employers will remit employee payroll deductions to the Washington Employment Security Department as part of their quarterly state filing and reporting.
It’s a good idea to notify your Washington state employees about the upcoming November 1 deadline for opting out of the tax. Create a reminder now to apply the tax within your payroll system during your 2021 year-end process so that you are ready to withhold the WA Cares premiums from employee wages starting January 1, 2022.