Potential delay of new long-term care payroll tax considered

By Rachel La Corte / Associated Press

OLYMPIA — Washington Gov. Jay Inslee said Thursday he is talking to lawmakers about a potential delay in the collection of a mandatory payroll tax to fund Washington state’s new long-term care program.

On Wednesday, Senate Democratic leadership sent Inslee a letter asking him to delay implementation of the premium assessment — set to start in January — until Jan. 1, 2023, saying that it would allow the Legislature to address concerns about the program.

Inslee said at a news conference he didn’t have the authority to make a unilateral decision. He said a pause could come as the result of a special session, but said he is also talking to lawmakers about other approaches that would allow a pause of the program’s implementation while the Legislature works on aspects of the bill during its 60-day session that begins Jan. 10.

Inslee said because the tax, which is withheld by employers, is not due to the state until April, it’s possible that timeframe “could give the legislature time to make these refinements.”

“But we’re seeking legal clarification on that to make sure that’s the case,” he said, saying that a decision was expected within days.

Mike Faulk, a spokesman for Inslee said the office is “exploring how to suspend payment by employers to the state and a mechanism for employers to reimburse employees.”

“A lot of details still need to be discussed with legislators,” he said in an email. “It’s extremely important people recognize that any potential steps on the governor’s end would be temporary. It would be the Legislature’s duty to find permanent solutions.”

The Senate letter — signed by Majority Leader Andy Billig and Sens. Karen Keiser, Rebecca Saldana, Manka Dhingra, Bob Hasegawa, Marko Liias and Emily Randall — expressed continued support for the intention of the program, called WA Cares Fund, which creates a limited benefit for people to draw from to pay for help with long-term care. But, in addition to some concerns about the program, including the number of people seeking exemptions and its current lack of portability for those who move out of state, the lawmakers said the program needs to be looked at “through the lens of the pandemic.”

“As our state and nation continue to grapple with Covid-19 and support a healthy financial recovery for everyone, now is not the time to add a payroll deduction, even for a critical need,” they wrote. “We know Washingtonians face challenges with housing, childcare and other costs during this recovery and we do not want to add another at this difficult time.”

Under the law, which was passed in 2019, workers will pay a premium of .58% of total pay per paycheck, meaning an employee with a salary of $50,000 will pay $290 a year. Starting Jan. 1, 2025, people who need assistance with at least three “activities of daily living” such as bathing, dressing or administration of medication, can tap into the fund to pay for things like in-home care, home modifications like a wheelchair ramp and rides to the doctor.

The benefit also covers home-delivered meals, and reimbursement to unpaid family caregivers. The lifetime maximum of the benefit is $36,500, with annual increases to be determined based on inflation.

Supporters of the program decried any effort to delay the program.

“Delaying WA Cares would harm an estimated 38,000 disabled, elderly, or seriously ill people who are desperate for long-term care benefits in 2025,” Jessica Gomez with the coalition Washingtonians for a Responsible Future, said in a written statement.

According to AARP of Washington, 70% of residents 65 and older will require some type of assistance to live independently.

Gomez also said the delay would create confusion for those who bought private long-term care insurance this year by a Nov. 1, deadline in order to opt out of the tax.

As of Dec. 2, the Employment Security Department had received more than 430,000 applications for an exemption, and more than 334,000 had been approved thus far.

The high number of exemptions has raised concerns about the viability of the program, and the potential of a premium increase for workers.

“If the long-term solvency is in doubt, we must be able to examine all options for modifying the program to ensure viability into the future,” the Democratic senators wrote.

To be eligible for the state benefits, workers will have had to have paid the premium working at least 500 hours per year for three of the previous six years in which they’re seeking the benefit or for a total of 10 years, with at least five of those paid without interruption.

The benefit is not portable, so people who pay into the program but later move out of state will not be able to access it, and it only covers the taxpayer, not a spouse or dependent. The benefit also isn’t available to those who work in Washington and will pay the deduction but live in neighboring states, like Oregon.

Last month, a class action lawsuit was filed with the federal court for the Western District of Washington on behalf of three businesses in the state and six individuals opposed to the payroll tax.

Democratic House Majority Leader Pat Sullivan said leaders in the House are already looking at changes to elements of the program, including portability and border state residents.

“A delay would give us more time to address some of those issues that have been raised,” he said.