Recent announcements by Governor Inslee, Senate Majority Leader Andy Billig, and Speaker of the House Laurie Jinkins have created uncertainty about employers’ obligation to collect the 0.58% payroll tax that goes into effect on January 1, 2022.
In 2019, the Legislature passed HB 1087 to implement a Long-Term Care Program funded by a 0.58% tax on employee earnings. The Washington Cares Fund tax is intended to provide financial assistance for long-term care. Under the original legislation, workers could opt out of the program at any time. In 2021, however, the law was amended to require all workers to contribute to the program unless they could show proof of private long-term care insurance by November 1, 2021.
As the January 1 deadline approached, workers and employers realized that even though they would be paying into the WA Cares program, eligibility requirements would severely limit the ability to receive benefits. For example, even if you paid into the program for the requisite number of years, you could not collect benefits if you moved out of state. Accordingly, employers and workers joined together to communicate substantive concerns with the program over the Summer and Fall.
On December 17, Governor Inslee, Majority Leader Billig, and Speaker Jinkins announced that the Employment Security Department (ESD) will not collect premiums from employers until April 2022 to allow the Legislature time to act which is consistent with current law. Under HB 1087, ESD is required to mirror the collection process established by the Paid Family and Medical Leave program. Like unemployment insurance, employers remit quarterly to ESD. Hence collections do not begin until April.
In the same announcement, Speaker Jinkins and Majority Leader Billig stated,
“In addition to delaying the premium assessment, we also support employers pausing premium collections from employees in Washington so lawmakers can take necessary action. While we cannot direct employers not to collect, we strongly encourage them to pause on collecting premiums from employees, giving us time to pass legislation extending implementation dates until next year.”
The problem with this statement is that the law requires the collection of the tax beginning on January 1, 2022. Moreover, the December 17 announcement did not indicate the scope of changes anticipated in the program.
On December 23, the Governor attempted to clarify the situation by stating,
“…as an employer, the state of Washington is following the law and will have to begin collecting money from state employee paychecks as of January 1. We know that many other private employers are doing the same, and others are hoping that the Legislature will change the law. However, if the Legislature fails to do so, employers will still be legally obligated to pay the full amount owed to state ESD to begin the long-term care program.”
In other words, the Governor recognizes that the state of Washington “is following the law” and will begin collecting the tax from state employees on January 1. He also lets employers know that they will still be legally obligated to pay the amount owed to the state if the Legislature fails to act or opts to work on other program features.
The Washington Retail Association has joined with other business and worker organizations in urging significant changes to the program. Washington Retail also acknowledges that current law requires collecting the 0.58% payroll tax beginning January 1, 2022. We advise members to consult with their financial and legal advisors if considering other options.