Long-Term Care Tax (“WA Cares Fund”) Implementation Delayed Until July 1, 2023

On January 27, 2022, Gov. Inslee signed into law an 18-month delay of the effective date of the state’s new long-term care (LTC) program, the Washington Cares Fund. The original effective date was January 1, 2022; the new effective date is July 1, 2023. This means that employers who have employees in the state of Washington do not need to start collecting the WA Cares Fund payroll tax of 0.58% of the employee’s wages until July 1, 2023. (See the articles on the background of this subject in the December 21, 2021, and January 4, 2022, editions of Compliance Corner.)

Because this legislative enactment to delay the implementation of the program came after the original payroll collection effective date of January 1, 2022, some employers might have already begun collecting the premium tax from their employees’ wages. If so, the employers are required to refund any premiums collected from the employees within 120 days of the collection. Further, if the employers have already remitted the collected premiums to the Employment Security Department (ESD), the ESD is required to refund those premiums to the employers within 120 days of the collection. Employers are then required to return the collected premiums to the employees.

In addition to the delay of the premium tax collection start date, the benefits’ availability for the LTC program is now delayed until July 1, 2026, from January 1, 2025.

The decision to delay the implementation timeline came in response to the public criticism of some elements of the law. For instance, under the benefit eligibility requirements, an employee had to contribute to the program for at least 10 years before taking the benefits. As a result, employees close to retirement were disadvantaged because their benefits would not be vested even though they would be required to contribute to the program while employed. In response, under the newly revised law, individuals born before January 1, 1968, may receive partial benefits even if they have not paid the premiums for at least 10 years.

Employers with employees working in Washington should be aware of the delay in the payroll tax collection until July 1, 2023, and should communicate and coordinate with their payroll vendor on the new timeline.

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