Are you ready for the long-term payroll tax? November deadline to opt-out quickly approaches

Jun 24, 2021
Written by wpengine

When the long-term care (LTC) program was originally passed in 2019 it allowed individuals to opt-out of the program at any time if they have private LTC insurance. Legislation adopted earlier this year restricts that exemption to individuals who have purchased private LTC insurance by Nov. 1, 2021. Then, they must apply to the Employment Security Department (ESD) for an exemption. ESD will accept applications from Oct. 1, 2021, through Dec. 31, 2022. But even though applications for exemption are accepted through December 2022, the insurance must still have been purchased by Nov. 1, 2021. Also, if exemptions are granted, there will be no refunds of payroll taxes paid before the exemption was approved.

Additionally, the Washington Research Council dives into the question of how high the LTC payroll tax will be to maintain solvency in their latest article. The tax rate is not set in stone and will be at 0.58% for the first two years, but after that the tax rate will be set by the Pension Funding Council, at the “lowest amount necessary to maintain the actuarial solvency of the long-term services and supports trust account.” This will likely be higher than 0.58% because last year voters rejected ESJR 8212.

As the Washington Research Council explained in their policy brief on the proposed constitutional amendment, ESJR 8212 would have allowed funds in the long-term services and supports trust account to be invested in stocks. This would have meant higher rates of return to the account over time, which in turn would have allowed for lower LTC payroll tax rates. Instead, according to the Long-Term Services and Supports Trust Commission (LTSSTC), the payroll tax rate might now need to increase to 0.66% to maintain long-run solvency.

Read more here and here.