New State Employee Payroll Tax Law for Long-Term Care Benefits - Washington State Hospital Association

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Purpose
This bulletin provides hospitals and health systems information about House Bill 1087, passed in 2019, which creates the Long-Term Services and Supports Trust Program (referred to in this bulletin as the “LTSS Program” or “WA Cares Fund”). This also provides information about House Bill 1323, passed in 2021, which modifies a few provisions of the LTSS Program. In summary,

• Starting January 1, 2022, a 0.58% premium assessment will be imposed on all Washington employee wages. There are no specific exemptions for hospital or health system employees. However, an employee has a one-time opportunity to opt-out if they have comparable private long-term care insurance (see below for details).

• Starting January 1, 2025, proceeds of this premium assessment will be used to provide long-term services and supports benefits to Washington State residents who have paid into the LTSS Program for a specific amount of time and who need a certain amount of assistance with activities of daily living.

Applicability / Scope
The LTSS Program will be funded by premium assessments. Starting January 1, 2022, all Washington employee wages (those employees who work in Washington, receive wages reported on a Form W-2, and work at least 500 hours per year) are subject to a 0.58% premium assessment (for example, $0.58 premium assessment on every $100 of eligible wages).

This is not a tax on employers, but employers are required to collect premiums through employee payroll deductions and remit proceeds to the Employment Security Department (EDS). This agency will deposit funds in a trust for the individual until they qualify for the benefit.

All qualifying employees are subject to the premium assessment, with the following exceptions:

• Individuals who have private long-term care insurance may opt-out: Any employee who attests that they have comparable long-term care insurance purchased before November 1, 2021, may apply to ESD for an exemption from the premium assessment. The employee must provide proof of their ESD exemption to their employer before the employer can waive collecting the premium assessment from the employee’s wages. The employee must apply for the opt-out exemption to ESD between October 1, 2021, through December 31, 2022.

• Self-employed individuals may opt-in: Starting on January 1, 2022, any self-employed individuals (non W-2 wage employees) may choose to participate. They may elect this option by January 1, 2025, or within three years of becoming self-employed for the first time.

Recommendations / Next Steps

• Review this bulletin and the WA Cares Fund website, including their employer resources.
  • This website will be updated regularly between now and the end of the year with new resources and materials.
  • Consider what payroll processes and procedures you need to implement this new premium assessment. This may include making payroll system changes to start collecting and remitting the assessment as of January 1, 2022, ensuring ways to suppress the tax for any non-W-2 employees and those W-2 employees who obtain a waiver, retaining records of those waivers, and ensuring ESD remittance is made quarterly, starting April 30, 2022.
• Consider informing your employees about this new premium assessment, including the benefits available under the state program and the ability to opt-out by November 1, 2021, if they have comparable private insurance coverage. If you do, please inform them that they must apply to ESD for an exemption and provide proof of exemption to their employer. This must be done before an employer can waive collecting the premium assessment.
  • To inform your employees, you may direct them to the WA Cares Fund website and the DSHS one-page document. The state will provide additional information through the summer and fall.
• As an employer, consider whether you want to provide long-term care insurance to your employees. Note that the coverage offered must be comparable to or greater than the benefits in the state’s LTSS program. You may want to also consider as the employer if you will fully or partially pay for this benefit or if an employee will be fully responsible for the cost.
  • If you are evaluating private long-term care insurance options, some factors to consider may include residency requirement (does the employee have to live in Washington to be eligible for benefits), vesting period, benefits, premium stability, the ability for spouses or partners to participate, and underwriting.

Overview
Employee Premium Assessment and Employer Responsibilities
Starting January 1, 2022, ESD will assess each Washington employee a 0.58% premium assessment based on their wages. The rate may be adjusted every two years but cannot be greater than 0.58%. The employer must collect this premium assessment through a payroll deduction and remit the proceeds to ESD. It is anticipated that the employer remittance process will be like the Family and Medical Leave Program. As noted above, there are very limited exceptions to participation, including for those who are self-employed (unless they opt-in) or have comparable private long-term care insurance.

The LTSS Program defines “employee” and “employer” the same as it is defined for the Family and Medical Leave Program (see RCW 50A.04.010). It also defines “wages” the same as the Family and Medical Leave Program, except that all wages are subject to the premium assessment and not limited by the ESD Commissioner, as provided in RCW 50A.04.115.

Eligibility to Receive Benefits Under the LTSS Program
Starting January 1, 2025, an individual may receive benefits from the LTSS program if:

1. They are a Washington resident;
2. At least 18 years old;
3. Have either temporarily or permanently vested; and
4. The Department of Social and Health Services (DSHS) has determined they need assistance with at least three activities of daily living (bathing, dressing, eating, personal hygiene, etc.).

Vesting: An employee is temporarily vested if they have worked a minimum of 500 hours per year for three years within the last six years (from the date of application of benefits). An employee is permanently vested if they have worked at least 500 hours per year for at least 10 years, with at least five of those years being consecutive.

Long-Term Care Benefits
Upon becoming eligible, a person may receive approved services of up to $36,500 over the course of the person’s lifetime. The DSHS will pay, in $100 increments (may be adjusted annually for inflation), long-term services and supports providers. These can include adult day services, in-home personal care, assisted living services, adult family home services, nursing home services, care transition coordination, dementia supports, home safety evaluation, adaptive equipment, respite for family caregivers, transportation, home-delivered meals, education and consolation, relative care, professional services, and services to assist family members to care for eligible individuals.

Long-Term Care Providers
Approved services must be provided by a long-term service and support a provider who is qualified to provide the service and is registered with the DSHS to participate in the LTSS Program. Long-term services and supports providers may be a home care aide, assisted living facility, adult family home, nursing home, in-home services agency, adult day health program, vendor, instructor, qualified family member, or other entity.

Within 120 days of becoming a long-term care worker, a spouse or registered domestic partner who is a long-term care worker under the LTSS Program must receive 15 hours of basic training and six hours of focused training based on the spouse or domestic partner’s needs. The spouse or domestic partner acting as a long-term care worker does not need to become a certified home care aide.

Program Administration
The LTSS Program will be administered jointly by the DSHS, ESD, the Health Care Authority (HCA), and the Office of the State Actuary (State Actuary). Their respective roles will include:

DSHS	Makes determinations regarding eligible beneficiaries, services, and providers. Disburses payments, provides educational materials, and addresses customer service issues.
ESD	Assesses and collects employee premiums, monitors the LTSS Program’s solvency.
HCA	Determines status of qualified individuals, assures that services are provided, establishes criteria for making payments to providers.
State Actuary	Performs actuary audits and valuations every two years.

Program Oversight
An LTSS Commission will be established and include legislators, agency directors, representatives from numerous long-term care organizations, a long-term care worker, and an employer who collects and remits the premium assessment from its employees. It will establish rules and policies for the LTSS Program, monitor the LTSS Program’s solvency, and make annual reports to the Legislature.

Background
Medicare and commercial health plans do not cover long-term care. Medicaid covers long-term care for qualified low-income individuals. For those who do not qualify for Medicaid, they must rely on family caregivers or use their savings to pay for in-home or residential long-term care.

In 2018, House Bill 2533 proposed to create the LTSS Program. While it did not pass, the concept gained significant support from lawmakers and long-term care stakeholders. During the interim, the Long-Term Care Trust Act workgroup was convened to address questions raised during the 2018 session. In 2019, House Bill 1087 was introduced that allows spouses or domestic partners to be caregivers, unlike the previous year’s bill. The bill passed the House and Senate along party lines. In 2021, House Bill 1323 was passed that slightly modified the LTSS Program, including clarifying several provisions. Among those, includes requiring DSHS, ESD, and HCA to develop and distribute educational material to the public.

References

• Being marketed as “WA Cares Fund”, DSHS, ESD, and HCA have developed a public website that provides information to both employees and employers about the new long-term care premium assessment and benefits.

• DSHS has developed a one-page document that summarizes the long-term care benefit, including the premium assessment.

WSHA’s 2020 New Law Implementation Guide 
Please visit WSHA’s new law implementation guide online. The Government Affairs team is hard at work preparing resources and information on the high-priority bills that passed in 2021 to help members implement the new laws, as well as links to resources such as this bulletin. In addition, you will find the Government Affairs team’s schedule for the release of upcoming resources on other laws and additional resources for implementation.

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