Insights for Your Journey

Washington State’s LTC Trust Act is intended to offer long-term care coverage to state residents funded by a mandatory payroll tax. Here’s how it works and how you can opt out. For more on long term care insurance, read Long Term Care Insurance 101 and Hybrid Long Term Care Insurance – An Upgrade on Traditional Benefits.

What does the LTC Trust Act provide? 

It offers short term benefits with a $36,500 lifetime maximum to offset expenses for things like nursing and assisted living facilities, professional caregiving and caregiver supporthome health care, and meal delivery. 

How much is the mandatory payroll tax and who pays it? 

Starting January 1, 2022, WA State will impose a 0.58% payroll tax on all W2 income. This starting rate is expected by many to increase in the future.

Self-employed individuals can opt in but are not currently required to participate, though this could change in the future if the plan ends up underfunded.

Who is covered under the plan? 

To qualify, you must be a current resident of Washington State and meet the following criteria: 

  • Employees who pay for 10 years without a 5-year consecutive break are permanently vested. 
  • Employees who pay for 3 of the last 6 years are vested but could un-vest status once they no longer meet the “3 of the last 6” rule if they haven’t paid for 10 years. 
  • Require assistance with a minimum of 3 Activities of Daily Living (ADL) – medication management, personal hygiene, eating, toileting, transferring, body care, bathing, ambulation/mobility, dressing, cognitive impairment. 
What if I move out of Washington? 

You must stay a resident of Washington State to qualify for benefits. If you move out of state for five years or more, you forfeit all benefits and taxes paid. 

How do I file an exemption to opt out?

Washington State is accepting exemption applications between October 1, 2021-December 31, 2022. This is a permanent opt-out – once out, you cannot opt back in.

First, to opt out, you need private qualifying long term care coverage in force before November 1, 2021. You will not need to submit proof of coverage when applying for your exemption, you’ll just need to attest that you have the required coverage. The state does reserve the right to request proof of coverage in the future.

Washington law generally includes personal and group long-term care policies, as well as qualifying long term care riders attached to life insurance policies. Chronic illness and accelerated death benefit riders, common in many life insurance policies, will not count for the exemption. The law doesn’t specify a minimum amount of required coverage, though you should at least match the state’s plan – $100/day for 365 days for a total long-term care benefit of $36,500.

Next, submit your exemption application:

  1. Navigate to the WA Cares Fund website and click “Apply for an exemption”.
  2. If you don’t already have one, you’ll need to create a SecureAccess Washington (SAW) account. From the SAW homepage, select “Sign Up” and follow the prompts.
  3. Add Paid Family and Medical Leave to your SAW services. Once logged in, select “Add a new service”, then “I would like to browse a list of services by agency”, then scroll to “Employment Security Department”, and select “Paid Family and Medical Leave” from the menu.
  4. Submit exemption application. From your SAW homepage, select “Access now” next to Paid Family and Medical Leave, then select “Create an account” under the “WA Cares exemption” section, enter required personal information, then click “Apply for exemption”. You’ll be required to submit proof of identity, so have a picture of your driver license, passport, or other accepted form of identification.
WA State’s constitution doesn’t allow income taxes, will this survive legal challenge? 

Washington State’s constitution does not currently allow for income taxes to be assessed by the state. Legislators have called this a “premium assessment” and not a tax to circumvent the prohibition, however because it’s calculated as a percentage of income, it’s unclear if this will stand in court.

Mallory Hall - Alterra Advisors

Mallory Hall

Financial Advisor

About the Author

Mallory brings more than a decade of experience in boutique wealth management and institutional finance to Alterra. A Pacific Northwest native, Mallory completed her degree in Finance at Seattle University and later earned Certified Financial Planner™ and Certified Private Wealth Advisor® designations. She credits that education to a wonderfully supportive extended family. As she tells it, her family’s unwaveringly support inspired her passion to pass this education on to others.

Mallory looks at her financial education as a life-changing gift that she shares with enthusiasm. She thinks math is fun, and markets are interesting, but the work of a financial advisor is about doing good for others. Mallory has a natural knack for the analytics, but she is motivated by how this skillset can be applied directly to improve the everyday lives of her clients. Because she stresses the educational role of a financial advisor, Mallory’s ultimate goal is to be a “multi-generational advisor” guiding a family’s assets and goals as they change from one generation to the next.

In her spare time Mallory loves exploring the outdoors with her family. She’s also a passionate supporter of her husband’s business where they craft custom frames for a wide range of fine art.

The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.

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