Washington State recently passed the Long Term Care Trust Act. Starting January 1, 2022, all W-2 income in WA State will be taxed at 0.58% to fund this new program. Prompt attention may be required for those who are working and already have a private Long Term Care Insurance policy or those who are working and are interested in purchasing long term care insurance. Please read below for additional information.
As of 4/12/2021, this is what we know:
Who will pay?
- The LTC Trust will be funded by a 0.58% payroll tax on all W-2 income beginning 1/1/2022.
- There is no cap on wages used to calculate the tax.
- W-2 income includes company stock awards.
- Self-employed persons and independent contractors are excluded, but can “opt-in”.
| Hypothetical W-2 Income | 0.58% Tax |
|---|---|
| $100,000 | $580 |
| $150,000 | $870 |
| $250,000 | $1,450 |
| $500,000 | $2,900 |
What are the benefits of the WA LTC Trust Plan?
- Beginning 1/1/2025, eligible WA residents may receive up to $100 per day for long term care services. Maximum lifetime benefit is $36,500 (365 days).
- Current daily cost in Seattle – Home care (8hrs) ~$220, Assisted Living ~$224, Nursing Home ~$400.
Who will benefit from the Plan?
- Only qualified Washington residents1 who, at the time of the claim2, paid the tax for either a) 3 years within the last 6 years, or b) for a total of 10 years, with at least 5 years uninterrupted.
What can you do (e.g. how to opt-out of the tax)?
- For those with an existing private long term care insurance policy:
- Apply for an exemption from the payroll tax with the employment security department (“ESD”) from October 1, 2021 – December 31, 2022.
- Provide the approval letter from ESD to your employer.
- For those without an existing private long term care insurance policy:
- Purchase a qualified long term care policy by November 1, 2021.
- Apply for an exemption from the payroll tax with the employment security department (“ESD”) from October 1, 2021 – December 31, 2022.
- Provide the approval letter from ESD to your employer.
Sample premiums for a private policy
Coverage includes $3,000 per month, 2 year benefit period, 3% compound inflation rider:
| Private Policy Premiums | Age 30 | Age 40 | Age 50 |
|---|---|---|---|
| Male | $845 | $881 | $1,045 |
| Female | $1,254 | $1,292 | $1,597 |
| Married Couple | Discounts may be available | ||
If you are interested in exploring your options for a qualified long term care policy, or a hybrid long term care / life insurance policy, please start by contacting an insurance professional (see our Recommended Resources) to determine your eligibility, and to obtain a quote. If you still have questions on whether a private policy is right for you, contact Arrivity Financial Planning to set up a consultation.
1 Must reside in the State of Washington. Any person that moves out of the State of Washington for 5+ years will forfeit all benefits and taxes paid.
2 A qualifying claim requires that an individual needs assistance with a minimum of 3 of 10 Activities of Daily Living (“ADLs”): medication management, personal hygiene, eating, toileting, transferring, body care, bathing, ambulation/mobility, dressing, and cognitive impairment.