Washington Cares Fund Agreement announced – Employer responsibilities remain unclear

Jan 6, 2022
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Written by wpengine
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Inside Washington Retail

On January 4, Speaker of the House Laurie Jinkins announced that an agreement had been reached between Democratic Leaders in the House and Senate and the Governor to delay implementation of the Long-Term Care program for 18 months. The delay includes collection of the 0.58% payroll tax to fund the program. Speaker Jinkins and Majority Leader Pat Sullivan indicated that they plan to move these bills to the Senate within the first two weeks of Session.

The agreement:

  • Delays implementation of the Long-Term Care program until July 1, 2023
  • Allows for a pro-rated long-term care benefit for individuals who are at least 54 years of age and retire within 10 years of program implementation.
  • Adds new exemptions for disabled veterans, military family members, immigrants, and non-state residents.

The agreement also includes a requirement that if the delay is signed into law, any employer that withheld the payroll tax beginning January 1 is required to remit it back to their employees within 120 days. Additionally, if the employer had remitted the payroll tax to the Employment Security Department (ESD), then ESD is required to remit the amount back to the employer within 120 days.

Two bills, HB 1732 and HB 1733, have been pre-filed to implement the agreement.

Background:

In 2019, the Legislature passed HB 1087 to implement a Long-Term Care Program funded by a 0.58% tax (called “premiums”) on employee earnings to fund the Washington Cares Fund beginning January 1 2022. In 2021, however, the law was amended to require all workers to contribute into the program unless they have secured a private long-term care insurance policy by November 1, 2021.

Over the past year, unions, and employers, including the Washington Retail Association, communicated about several significant issues over eligibility requirements to collect benefits and the new payroll tax.

Employer Responsibilities and Options:

The current situation remains somewhat cloudy. Current law requires employers to begin collecting the 0.58% payroll tax on January 1, 2022, according to WAC 192-910-015. However, it appears likely that legislative action to delay the program by 18 months will happen early in 2022.

The proposed legislation identifies the following scenario, which may be employer’s preferred option:

  • An employer complies with current law and withholds the payroll tax beginning January 1. However, the Employment Security Department (ESD) will not require remittance of the payroll tax to the state until April 2022.
  • If the proposed agreement is passed and signed into law, then the employer returns the amount withheld to their employees.
  • If the employer has remitted the payroll tax to ESD), then ESD has 120 days to remit back to the employer.

Speaker Jinkins pointed out that Washington State will collect the payroll tax from state employees beginning January 1. She also indicated that the House and Senate will not withhold the payroll tax from legislative staff beginning January 1.

An employer should seek advice from their legal and/or financial advisor as they consider their options.