The State of Washington has released information to assist employers in meeting their requirements under the Washington Cares Act.
Background
Washington's long-term care benefits program, "WA Cares," was set to begin on January 1, 2022. Under the program, employers were to deduct a .58 percent premium from employee wages and remit that premium to Washington's Employment Security Department ("ESD"). WA Cares covers nearly all employees employed in Washington State.
In November of 2021, a lawsuit (Pacific Bells, et al. v. Inslee) was filed, arguing that WA Cares violated federal laws. The case was dismissed, but to address concerns, Washington passed House Bill 1732 and House Bill 1733, which:
- Delayed premium collections to July 1, 2023;
- Delayed benefits to July 1, 2026;
- Provides limited relief for employees within 10 years of retirement; and
- Expands exemptions for certain employees.
The Details
Washington has released an employer toolkit, a FAQs sheet and more employer resources on its website to assist employers in preparing for WA Cares requirements.
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Employer requirements
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Starting July 1, 2023, employers must withhold a "premium" of .58 percent of an employee's wages unless the employee provided (or provides in the future) a state-issued exemption letter.
An employer must stop withholding from the employee by the effective date of the letter (or immediately if provided after the effective date) once it is received. Otherwise, the employer is liable to the employee. Washington will not return funds that are improperly withheld.
Note: The law caps the tax rate at .58 percent of wages, which cannot be increased without legislative action.
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Eligible wages
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Wages that are subject to the tax are uncapped. All wages and remuneration (stock-based compensation, bonuses, paid time off, severance pay, etc.) are subject to the tax.
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Employees subject to the tax
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All employees who are ”employed” in Washington State are required to pay the WA Cares tax. There are exceptions for federal employees, employees of tribal businesses, self-employed individuals and employees who qualify for an exemption (see below).
An employee is treated as “employed” in Washington if the work they perform is localized in Washington or they perform some work in Washington that is directed or controlled from Washington (if the work is not localized in any state).
WA Cares uses the same localization definitions as the state’s Paid Family and Medical Leave program (found in RCW 50A.05.010). If an employee is subject to the Paid Family and Medical Leave program then they are also subject to WA Cares absent an approved exemption.
WA Cares is also delayed for employees who are a party to a collective bargaining agreement in existence on October 19, 2017. These employees are not subject to WA Cares unless and until that agreement is reopened, renegotiated or expires. Parties must notify ESD when the collective bargaining agreement becomes open. As a practical matter, most agreements will have already reopened since October 19, 2017.
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Federal employees, employees of tribal businesses and self-employed individuals
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Federal employees who work in Washington do not contribute to the program.
Employees of tribal businesses only contribute if the tribe has chosen to opt in.
Self-employed individuals can choose to opt in.
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Employees exempt from the tax
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There are several types of exemptions:
· Employees who had private long-term care insurance before Nov. 1, 2021 were eligible to apply for a permanent exemption until Dec. 31, 2022. The timeframe for applying for this type of exemption has closed. If an employee has an approved private insurance exemption, they will continue to be exempt permanently and (under current law) are not able to enroll in WA Cares.
· Veterans with a 70% or higher service-connected disability can apply for a permanent exemption. Applications for this type of exemption became available Jan. 1, 2022 and are available on an ongoing basis.
· Some employees can apply for a conditional exemption. If an employee lives out of state, are a temporary worker with a non-immigrant visa, or are a spouse/registered domestic partner of an active-duty service member of the U.S. armed forces, then they can apply for an exemption.
Applications for these exemptions became available Jan. 1, 2022 and are available on an ongoing basis. Employees will qualify for these exemptions only as long as these circumstances apply.
If an employee’s situation changes and they no longer qualify for a conditional exemption, they must notify both the ESD and their employer(s) within 90 days. Employees will begin paying premiums and earning coverage for WA Cares Fund benefits the first day of the next quarter after their exemption is discontinued.
If employees fail to notify ESD and their employer(s) within 90 days, then they will be assessed the balance of their unpaid premiums with interest at the rate of 1% per month.
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Benefits
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Benefits will be payable on July 1, 2026. An eligible individual deemed by the Department of Social and Health Services to require assistance with at least three activities of daily living will receive up to $100 per day (up to a maximum lifetime limit of $36,500).
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WA Cares benefit qualification requirements
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Washington residents will receive full benefits if they have paid the tax for:
· Ten years without interruption of five or more consecutive years; or
· Three of the last six years before applying for the benefits
Employees born before January 1, 1968, who have not satisfied these requirements will receive a pro-rated 10% of the benefit amount for each year the tax is paid if they contributed to WA Cares for at least one year and worked at least 500 hours in that year.
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Next Steps
With WA Cares contributions scheduled to take effect on July 1, 2023, Washington employers should prepare to withhold wages and remit the WA Cares tax to ESD following the same means used for Paid Family and Medical Leave contributions.
Please contact your ADP Service Representative with any questions.