Pardon the Interruption of a normal Extra Points, with this important information for Washington State employers AND employees with the new Long-Term Care Act tax taking effect in January.
It has some significant timing involved over the next few months.
I encourage all of you non-WA State residents to still read…
this tax is coming to a state near you as many are already are in discussions.
The Washington State Long-Term Care Act officially takes effect on January 1, 2022.
Passed in 2019, its ramp up certainly took a back seat to the pandemic. That’s now changing as important dates are coming.
I’m including a brochure to download below that discusses the law and the audio of a 30-minute podcast interview with my friend and HR expert, Monica Blackwood from WestSound Workforce.
Here are some key points you need to know for your business, employees, and yourself.
- The 58 cents per $100 of income has no cap. If you or an employee are making $300,000 for example, your annual tax would be $1,740.
- The benefit – what you get in return – is limited to a LIFETIME benefit of $36,500. If you know anything about the costs of Long-Term Care at today’s rates, this could be eaten up in six months at today’s averages.
- The benefit can only be received in the State of Washington. In other words, if you move to Arizona for the sun, you would have to move back to Washington to receive benefits.
- And if you do leave for the sun and stay down there for more than five consecutive years, you forfeit any benefits!
- You must show loss of three activities of daily living, as opposed to what most insurances require of only two. Activities of daily living include the ability to feed yourself, bathing, dressing and undressing, mobility, continence, and toileting.
The kicker is that you can opt out, but only under certain circumstances.
For all W-2 employees, including the CEO or President of the company, you must show proof of individual Long-Term Care insurance equal to or better than the state program.
Self-employed individuals, defined as sole proprietors, independent contractors and partners, are not required to participate.
The opt-out period requires Long-Term Care insurance be in place by July 31 in advance of the appeal time starting after that. In other words, in order to appeal, you must have secured insurance coverage by July 31, not be in the application process.
Let’s do some very quick math:
A 45-year old earning $150,000 a year today and expecting to work another 20 years would pay a total of $ $87,000 over that time period – if they never earned a dime over that $150,000. Without getting too much in the weeds on math, let’s assume that it wouldn’t be surprising if they reached the $100,000 mark.
For that $100,000, they would have to remain living in Washington State for the rest of their lives in order to gain a maximum lifetime benefit of $36,500. Today’s average monthly cost for assisted living facilities is about $8,000 per month. Do the math. If they never need the benefit, including due to death, there is no benefit or return of premium to beneficiaries.
That same 45-year old could take out an individual Long-Term Care policy with a Return of Premium option. They could take out a policy where they pay $500 per month for 10 years ($60,000 total) and be eligible for a benefit of about $8,000-$10,000 per month over a four-year period – roughly about $432,000 of total benefits.
And, if they never needed it, there is a Return of Premium for the beneficiary equal to between 70-100% of that $60,000 premium payment!
I encourage you to consider a personal Long-Term Care policy as an option for yourself and your high wage earners. The benefits are greater, the cost much less expensive, the flexibility is better, and there is a return of premium option if you never use it. You have control.
You should contact your financial advisor or insurance broker to learn more. As an insurance broker who helps clients with Long-Term Care insurance (and who went through it with my own parents over a five ear period of time), I’m happy to talk about your individual situation or provide an educational forum for your employees.
This is a time-sensitive matter because unlike car insurance, it takes anywhere from two to six weeks to purchase this coverage. The time to take action for yourself and your employees is now.
Quote of the Week:
“It always seems impossible until it’s done.”
~ Nelson Mandela
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