On April 21, 2021, Governor Jay Inslee signed into effect the Long-Term Services and Supports (LTSS) Trust Act, now called the “WA Cares Fund” (or “Fund”), making Washington the first state in the country to adopt a mandatory, public, state-run long-term care insurance program for workers. Below are a few key highlights of the new law, with more details following:
- The law imposes a new employee-paid premium of $0.58 per $100 of earnings;
- There is no employer-paid portion of the premium;
- Employers are responsible for collecting, remitting, and reporting these premiums, and employers will face penalties if they do not;
- The benefits offered under the WA Cares Fund are limited;
- The WA Cares Fund premiums are uncapped, but there is a $36,500 lifetime cap, indexed for inflation, on the benefits an employee can receive , so highly compensated employees will help subsidize the program;
- WA Cares benefits are available only if the employee receives care in Washington; and
- Employees can opt out of the WA Cares Fund only if they secure their own private long-term care insurance by November 1, 2021, and they apply for and receive an exemption by December 31, 2022.
How does this law effect employers with operations in Washington? The WA Cares Fund will be funded by employee premiums via a mandatory payroll deduction. Beginning January 1, 2022, employers are responsible for collecting and remitting these employee premiums, as well as submitting a quarterly report of these premiums, to the Washington State Employment Security Department (ESD).
How will the WA Cares Fund be funded? Starting January 1, 2022, ESD will assess each individual employed in Washington a premium based on the employee’s wages equal to $0.58 per $100 of earnings (i.e., if employees earn $750/biweekly pay period, they would be assessed a $4.35 biweekly premium). The premium rate will be reassessed every other year beginning January 1, 2024, but is capped at .58%. The employee’s employer will withhold this amount and pay it to the WA Cares Fund. All Washington employees must contribute to the LTSS Trust, unless they are approved for an exemption (see below).
Is there a cap on either the employee premium or the benefits an employee can receive? Notably, there is no cap on the employee premium collected. Thus, highly compensated employees will contribute more to the Fund based on their earnings, yet they will only be eligible to receive the same lifetime benefit of $36,500, indexed for inflation, as all other employees. Employers may want to flag this feature of the law to their employees, especially given the fast-approaching deadline to opt out of the WA Cares Fund (November 1, 2021).
Do employers also contribute to the employee’s premium? Employers do not contribute to an employee’s premium or to the Fund on behalf of employees. Employers that willfully fail to withhold and remit the full amount of premiums when due, however, may be liable for the full premium and interest, and may be subject to a penalty. ESD is still adopting standards and procedures for enforcement.
How can employees opt out of the WA Cares Fund? Employees over the age of 18 can apply for an exemption from the premium assessment (or “opt out”) if they attest that they have purchased private long-term care insurance before November 1, 2021. Applications for exemptions will be available on ESD’s website, but they will be accepted only from October 1, 2021 through December 31, 2022. Employees approved for an exemption will receive a formal exemption approval letter from ESD. Employees who receive an exemption must notify their current and future employers by providing a copy of the approval letter. The approval letter is the only acceptable evidence an employer can rely on to not deduct, or to stop deducting, WA Cares premiums.
Exemptions are effective beginning the first day of the quarter following the date of the approval letter. Employees whose exemptions are approved after January 1, 2022 are not entitled to refunds for premiums already withheld.
This 13-month period is a one-time opt-out period, and no further opportunities to opt out will be provided. Once an employee has opted out and received an exemption, they are exempt for life and cannot at a later date reenter the WA Cares Fund.
Employers that receive a copy of an employee’s exemption approval letter must stop deducting premiums beginning on the first day of the quarter after the quarter in which the exemption was approved. If an employer wrongfully deducts premiums after being notified of an exemption, the employer is solely responsible for refunding the employee. ESD will not refund premiums remitted in error.
What if a Washingtonian is self-employed? Individuals who are self-employed, including sole proprietors, independent contractors, or joint venturers, may choose to opt in to the WA Cares Fund t, but they are not required to participate.
What if an employer has unionized employees? Employers and employees that are party to a collective bargaining agreement in existence on October 19, 2017, are not required to reopen the agreement or to comply with the WA Cares Fund law unless and until the existing agreement is reopened, renegotiated, or expires.
What does the WA Cares Fund provide? The WA Cares Fund provides eligible Washington workers who pay into the program, and who receive care in Washington, with long-term care benefits up to a maximum of $36,500 per person (to be adjusted annually for inflation). Starting January 1, 2025, workers who: (1) have vested in the Fund, and (2) need long-term care, can access their earned WA Cares Fund benefits.
How do workers vest in the WA Cares Fund? To vest in the Fund, employees must have worked and contributed to the fund for:
- At least 10 years without a break of five or more years; or
- Three of the last six years; and
- At least 500 hours per year during those years.
How does someone become eligible for benefits? To be eligible for benefits, individuals must: (1) be a Washington resident; (2) need assistance with at least three activities of daily living, such as: medication management, personal hygiene, eating, toileting, cognitive impairment, transfer assistance, body care, bathing, ambulation/mobility, and dressing, and (3) be receiving care in Washington.
What services and support does the WA Cares Fund provide? WA Cares Fund benefits can be used for long-term care services and supports, such as:
- Professional care at home, a licensed residential facility, or a nursing facility;
- Adaptive equipment and technology like wheelchair ramps and medication reminder devices;
- Home safety evaluations;
- Training, pay, and support for family members who provide care;
- Home-delivered meals;
- Care transition coordination;
- Memory care;
- Environmental modification;
- Personal emergency response system;
- Respite for family caregivers;
- Dementia supports;
- Education and consultation;
- Eligible relative care;
- Services that assist paid and unpaid family members caring for eligible individuals;
- In-home personal care; and
- Assisted living services.
WA Cares Fund benefits will be paid directly to a registered provider or qualified family member on behalf of the eligible beneficiary, not to the beneficiary.
What state agencies are responsible for overseeing the WA Cares Fund? The Washington Health Care Authority, the Department of Social and Health Services, the Office of the State Actuary, and ESD, all have distinct responsibilities for implementing and administering the WA Cares Fund. The Department of Social and Health Services will be responsible for preparing and distributing informational materials to the public on the WA Cares Fund program as deemed necessary by the LTSS Commission. ESD will be responsible for assessing and collecting employee premiums, and it will also conduct investigations to determine whether employers have complied with premium withholding, remitting, and reporting requirements.
What are the reasons for the creation of this new insurance program? The legislature cites data showing that 7 out of 10 Washingtonians over the age of 65 will need long-term services and supports within their lifetime. The legislature notes that many Americans do not have private long-term care insurance (which can be expensive), Medicare covers long-term care only in limited instances, and Medicaid requires people to spend down their savings to qualify for financial support—leaving more than 90% of seniors uninsured for long-term care. According to the Washington State Department of Social Health and Services, the number of people over the age of 65 in Washington has doubled since 1980 and will double again by 2040. The legislature states that this law is designed to help the state support those people who need assistance as they age, to prevent families from having to spend their life savings down to poverty levels to access long-term care, to help family caregivers who leave the workforce to provide care, and to focus on the need to provide meaningful assistance to middle-class families who are at greatest risk because they have not saved enough to cover long-term care costs.
Will other states follow? Other states, such as California, Illinois, Michigan, and Minnesota, are considering creating some type of long-term care fund and/or financing for their residents.
What’s next? Various state agencies, including ESD, are currently engaged in rulemaking to implement the law. Littler will keep clients apprised of significant regulatory and related developments affecting employers as they occur. Employers are advised to consult with counsel with specific questions or concerns.