What Families Should Know About the Washington Cares Fund and the Long Term Care Trust Act
One of the biggest financial challenges for most families is the uncertainty around long-term care costs. The costs can be for anything ranging from in-home medical support to retrofitting a home for more ease of use to paying for a stay at a facility of some sort, such as skilled care or assisted living. Recently, the Washington State House Health Care & Wellness committee has voted to advance the Washington State Long Term Care Trust Act. You might have also seen this Act referred to as the Washington Cares Fund or the Long Term Care Tax, which all reference this same legislation.
This Act, or Fund, will enable a short-term benefit provided by the state when an individual can no longer perform any 3 of the 10 Activities of Daily Living, known as ADLs. The ADLs include bathing, dressing, eating, transferring, toileting, hygiene, mobility, locomotion, medication management, and continence.
What does the Washington Long Term Care Trust Act do?
As mentioned, the Washington Cares Fund enables a short-term benefit provided by the state when an individual can no longer perform any 3 of the 10 ADLs. When triggered, the individual will receive a benefit paid out in $100 stackable units, capped at a maximum payout of $36,500. These benefits will grow with the Washington state inflation rate. The state will pay care providers directly. Providers will need to be on the approved list, although it appears that family members can be paid for performing some of those services if they complete approved training.
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What is the latest with the Washington Cares Fund and the Long Term Care Trust Act?
As of 12/17/2021:
The governor has decided to delay the implementation of the Act and the collection of the payroll tax until the state legislature can work out some questions and issues in the Act.
"I have been in ongoing discussions with legislators about the long-term care bill, which is set to begin collecting funds in January. This bill will help provide much-needed care and coverage for Washingtonians as they age. However, legislators have identified some areas that need adjustments, and I agree. We need to give legislators the opportunity to make refinements to the bill. Therefore, I am taking measures within my authority and ordering the state Employment Security Department not to collect the premiums from this program from employers before they come due in April. My actions mean that the state will not collect those funds until the Legislature sorts through these issues. While legislation is under consideration to pause the withholding of LTC fees, employers will not be subject to penalties and interest for not withholding fees from employees' wages during this transition."
- Gov. Jay Inslee
How would you qualify for the WA Cares Fund/Long Term Care Trust Act?
To be eligible for benefits, in addition to triggering 3 out of 10 ADLs, you must have paid the payroll tax for ten years, or at least three of the last six years, if you have a catastrophic disabling event. If you move out of Washington for five years, you forfeit the premiums and the benefit. Additionally, those who are currently retired may not pay premiums or receive a benefit. There will be an opt-out for the self-employed and an opt-out procedure for those who have private long term care insurance. Although once you opt-out, you can't get back in. And finally, your benefit is vested if you work a minimum of 500 hours per year, pay premiums for at least ten years (without a break of five consecutive years), OR who pay premiums for three of the last six years.
How will the Long Term Care Trust Act of Washington be funded?
The Washington Cares Fund program will be funded by a 0.58% payroll tax on all wages withheld quarterly by employers. So if you earn $100,000 in salary, your annual tax under this Act will be $580 per year. Again, if you currently have your own LTC policy, you can opt out of this program to avoid the Washington long term care tax. First payroll deductions will be on Jan 1, 2022, and the window for claims under this Act will begin Jan 1, 2025.
Is the WA Cares Fund worth it? Maybe.
Although I understand the underlying concept here, there are some planning considerations to be made. Washington state will spend $4b/year on Medicaid-funded LTC by 2030, by which time the WA Cares Fund is projected to save approximately $12.5m/yr or ~0.31% of Medicaid's budget. Here are a few things to keep in mind:
The Act has no portability outside of Washington. If you work in an industry where you change employers and relocate, you may not be eligible for benefits.
There are no elimination period options (45 days is stated in the Act).
There is no ability to cover retired individuals.
There is the variability of payment for the same benefit. An employee making $60k will pay $3480, and an individual making $150k will pay $8700 over the ten-year period. There is definitely a cost/benefit decision to be made here.
There is no health underwriting, which can be a challenge for individuals seeking a private policy, offering some coverage for individuals with health concerns.
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There is a lot more to the Washington State Long Term Care Trust Act, but it should be evaluated based on an individual's goals and situation like any piece of financial planning. Learn more about the Washington Cares Fund here, or you can read the Long Term Care Trust Act in full at Access Washington.
If you have any further questions, please don't hesitate to contact me here.
Learn more about how new regulations might affect your financial plan:
Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.