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Washington Long-Term Care Act

Consider the potential benefits of the Washington Cares Act.

Washingtonians who are W-2 employees will see an additional tax deduction on their paychecks starting Jan. 1, 2022, unless they choose to opt-out.

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The Washington state legislature passed the Long-Term Care Trust Act and Gov. Jay Inslee recently signed it into law, creating the “Washington Cares Fund.” The purpose of the new law, fund, and worker-funded tax is to help ensure the state's aging population will have access to long-term care (LTC) services like lengthy hospital stays, assisted living, rehab facilities, and skilled nursing care if and when they need such services in the future.

If the idea of paying an additional, mandatory 0.58%, employee-funded payroll tax ($580 for every $100,000 of earnings) doesn't sound appealing, there is good news. The WA Cares Fund includes provisions allowing workers to opt-out. To do so, you will need to purchase your own individual long-term care insurance policy no later than Oct. 31, 2021. That policy can be a standalone long-term care policy, or a life insurance policy or annuity with a long-term care rider. Regardless of its form, a private policy must provide for equal or better benefits than those available through the WA Cares Fund.

What Are the Potential Benefits of Participating in the WA Cares Fund?

The cost of long-term care services is high and growing. The average monthly cost for assisted living/memory care statewide in 2021 is $5,750, with costs in some areas as high as $6,750 per month. Medicare does not cover long-term care costs. Because of this, the unfortunate reality is that many people end up having to spend down the assets they worked a lifetime to accumulate to pay for care.

The WA Cares Fund is designed to help minimize the potential burden long-term care expenses can place on Washingtonians and their loved ones by creating a lifetime benefit amount that vested workers can use to pay for care. To be vested and eligible to receive benefits under the new plan, you must have contributed for at least ten years during your lifetime, or at least three of the six years immediately leading up to applying for benefits, and you must have worked at least 500 hours per year in those years. The available benefit amount for eligible people is currently up to $36,500 which can be used to pay for a variety of covered services. Applicants should also consider that the WA Cares Fund is not available outside of Washington State and program participants must be a Washington State resident to receive potential benefits.

Consider Your Long-Term Care Options

The new WA Cares Fund will likely play a key role in helping to protect the assets for many Washington workers, retirees, and their loved ones. However, there are also reasons to consider taking advantage of the opportunity to opt-out of the new fund.

First, benefits under the WA Cares Fund are only available in the state of Washington. For those who think they may want to move out of Washington in their retirement years, a private long-term-care policy may provide coverage regardless of where you live when you need services.

It is also worth considering the costs and benefits of private policies compared to the WA Cares Fund. As previously mentioned, the new payroll tax will come at a rate of $580 per $100,000 in compensation — including salary, bonus, restricted stock awards, etc. There is no income cap, meaning highly compensated employees could end up paying significantly more for the WA Cares Fund on an annual basis than they would pay for private coverage, which could offer higher payout limits and potentially more attractive benefits.

If you are considering opting out of the WA Cares Act, it is important to know that doing so is a permanent decision. In other words, you cannot opt-out this year and then later change your mind. There is also a limited window for opting out. You will need to be able to prove that you have a qualified private insurance policy purchased before Nov. 1, 2021, and you will need to submit an exemption application between Oct. 1, 2021, and Dec. 31, 2022.

Talk to a Financial Advisor

To learn more and to explore options based on your specific circumstances and goals, contact a financial advisor with BECU Investment Services. Set up a complimentary consultation or call 206-439-5720.

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