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Seven (7) Types of People Who Won't Benefit from the Washington State Long Term Care Trust Act

Beginning January 1, 2022, Washington State will assess a mandatory employee-paid payroll tax on all W-2 compensation to fund a state-run long-term care (LTC) insurance program that could provide as much as $36,500 over the individual’s lifetime. The tax is $580 per year for every $100,000 in wages and applies to all income levels.

The following groups are likely to be displeased by the new act:

  • Pre-retirees (less than 10 years to go) will pay the tax without any prospect of getting a benefit because they will not have time to vest. In simple terms, vesting requires ten (10) years actively at work with no partial credit, meaning a person that pays for nine years gets nothing.

  • Employees that later move out of state will also get nothing because benefits are limited to in-state services, even if fully vested.

  • Employees that don’t value long term care insurance may resent the hit to take-home pay.

  • Highly compensated employees will carry a disproportionately high burden of the cost for no greater benefit.

  • Younger workers may resent the open-ended duration for which the payroll tax is levied, which will continue as long as they remain employed.

  • Labor groups may point out that the economic calculus will shift in favor of out-of-state labor and independent contractors, a trend that is already hard enough to slow down as it is.

  • Future beneficiaries of the program will not bother to take individual responsibility (by planning ahead financially) because they will want to believe the government has their back. They will eventually learn how far $100 really goes, but by then it will be too late to do anything about it.

Disability Underwriters

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Seattle, WA     98101

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