Your Custom Long Term Care Options

The State of Washington has passed a bill that helps address the high cost of long term care. This new law will assess a payroll tax on all employees to provide a minimum amount of long term care services. You can choose to purchase your own long term care plan that may qualify you to opt out of the payroll tax. Follow the steps below to begin your long term care discovery and planning process.

You have a choice if you act soon to purchase your own private LTC insurance policy that may qualify you to opt out of the payroll tax. Your policy must be purchased before November 1, 2021.

Step 1: Learn About Your Options and Compare Plans

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WA Trust Act vs LTCi

Step 2: Frequently Asked Questions

What is the Washington State Trust Act?

The Long-Term Services and Supports Trust Act (LTSS) was enacted in 2019 creating a long-term care benefit for eligible Washington employees that helps pay for long-term services and support. The Act levies a .58% payroll tax paid by all W-2 employees on all wages earned in the state. (Source: Washington State Department of Social and Health Services)

In 2021, the program was renamed the WA Cares Fund. The terms “Washington State Trust Act,” “WA Cares Fund,” and “LTSS (Long Term Services and Supports)” all refer to the same Washington state payroll tax.

What is the cost of the payroll tax?

The payroll tax is 0.58% of all wages including income, bonuses, vacation time, and the value of stock grants. Also consider how much your wages will grow in the future.

For example, if you make $100,000 annually on all wages, the LTSS payroll tax for this year would be 0.58% x $100,000 = $580. This is about $48 per month for every $100,000 of annual wages. If your income triples over the course of your career, you may pay $1,740 each year but may not receive any additional coverage with the state program.

What benefits are provided by the WA Cares Fund?

Beginning January 2025, each person who is eligible to receive the benefit can access services and support up to $36,500 ($100 per day for up to 365 days). The nominal value of this benefit may change over time.

When would I receive benefits from the WA Cares Fund?

To receive benefits, individuals must be unable to perform at least 3 out of 10 activities of daily living (ADLs) after becoming vested in the program. Individuals become vested when they pay the payroll tax for at least 10 years without a break of 5 consecutive years (unless the individual needs care and is applying for benefits, in which case it is 3 out of the last 6 years.)

What if I plan to retire outside of Washington state?

The WA Cares Fund only provides benefits to residents of Washington. If you move out of state for 5 or more years, you may forfeit payroll tax premiums and benefits. Alternatively, private long term care insurance offers national – and in some cases, international – portability of your benefits.

As a W-2 Employee, is there a way to opt out of the payroll tax?

There is one way to permanently opt-out of the payroll tax and WA Cares Fund, which is by purchasing long-term care insurance (LTCi) before November 1, 2021 and submitting the opt out form between October 1, 2021 and December 31, 2022.

Should I wait until closer to November 1st, 2021 to purchase LTCi to opt out?

It’s important to educate yourself about your options before making a decision. However, start planning early if you are considering purchasing private LTCi. There are a limited number of insurance products and LTCi specialist agents in Washington state. During normal times, it typically takes about 30-60 days to educate yourself, apply for, and get approved for coverage. Given the increased volume because of this new payroll tax, we anticipate wait times could significantly increase.

What is private Long Term Care insurance (LTCi)?

Long term care insurance is coverage that pays for nursing-home care, home health care, care in an assisted living facility, nursing home care, and personal or adult daycare for individuals with a chronic or disabling condition that needs constant supervision. LTC insurance may offer more flexibility and choice of providers compared and options than many to public assistance programs, such as Medicaid.

What are the advantages of LTCi compared to the payroll tax?

While researching your LTCi options, you will be matched with an LTCi specialist with years of experience to help guide you to the best plan for your dollar. The consultations are complementary.

LTCi policies may provide:

  • A much greater pool of benefit dollars in the future to supplement the high cost of care
  • Longer duration of benefits
  • Options to get a return of premiums or life insurance if LTC benefits are never used
  • The ability to adjust your coverage in the future
  • Spousal discounts and discounts for being in good health
  • Coverage immediately after issue (no vesting period is required)
  • Portability to use the benefits in any state or Canada (international benefits may also be available)
  • Tax incentives, such as the ability to use your Health Savings Account (HSA), tax deductibility for business owners, and tax-free benefits
Is the payroll tax a good deal?

The biggest limitation of the payroll tax is the lifetime maximum of $36,500.

  • The average length of claim for individuals that need care for at least 90 days may be about 3 years.
  • The median cost of care in Washington state in 40 years may be close to $350,000 per year.
  • This makes the average risk of long-term care costs about $1,000,000 over 3 years (Source: Cost of Care Survey using 4% annual increases to the cost of care.)

Individuals that purchase private LTCi often have benefits in the future that are at least 10 times as much than the $36,500 provided by the WA Cares Fund.

The payroll tax may be a poor deal for higher wage earners who are in relatively good health because they would be able to purchase private LTCi and receive more value for their dollar.

The payroll tax may be a good deal for lower wage earners or those in poor health, who will pay the payroll tax for at least 10 years, and retire in Washington state.

What is the minimum LTCi coverage I can buy to opt out?

BuddyIns LTCi Specialists typically recommend purchasing a minimum of $100/day of coverage with a minimum duration of 2 years and adding compound inflation protection. This provides initial benefits at least comparable to the state’s plan, plus extended duration and inflation protection that can grow total benefits to several hundred thousand dollars when you are most likely to need long-term care services.

LTCi premiums for this estimated minimum coverage will vary by age and health; the rates typically range from $40 to $160 per month.

Does it make sense to buy more than the minimum LTCi coverage?

Yes, there are a variety of reasons to buy more coverage. Your LTCi specialist can shop the market to find the best value.

Reasons to buy more than the minimum:

  • The medium cost of care in Washington today is $200 per day compared to the $100 per day payout offered by the minimum plans
  • Private LTCi may be a better value when buying more years of coverage because the additional years cost incrementally less
  • You may be able to pre-pay the premiums to have your premiums paid before retirement
  • Extra features, such as return of premiums, may be available if the LTCi is never used
  • You may be able to pay with pre-tax dollars from an HSA or write off the premiums as a health insurance business expense
Can I use my HSA to fund my long term care insurance premiums?

HSA funds can be used to pay LTCi premiums.

  • You may be able to contribute pre-tax dollars into your HSA up to annual limit.
  • You may be able to pay the premium and request reimbursement from your HSA administrator for you or your spouse each year up to an annual age-based limit.
How do I use my business to fund my LTCi premiums?
  • Business paid LTCi premiums may be a tax-deductible business expense as health insurance for employees and spouses.
  • Self-employed business owners may also be able to deduct LTCi premiums on their individual tax returns up to an annual age-based limit.
  • Owners can select which executives or employees to include in the LTCi program.
  • LTCi benefits are generally received tax-free even after the tax deduction.
I want to consider my options. What's next?

By filling out the form below, you can meet remotely with an LTCi specialist with years of experience for free to help guide you to the best plan for your dollar.

Our LTC specialist community is here to help. Long term care planning may be one of the most meaningful things you can do for your family to protect them from becoming unintended caregivers.

Step 3: Complete the Important Health Information

should i Stay or Go

Upcoming Webinar

Washington Trust Act: Should I Stay or Should I Go?

Thursday, August 5th, 2021 at 10am PT

Washington state is implementing a payroll tax to fund long term care. There is a one-time opt-out opportunity available now. Join BuddyIns CEO Marc Glickman and Account Manager Andy Wayt for an important discussion for those who work in Washington. Get your questions answered live during the Q&A portion of the webinar.