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Your paycheck will be smaller in January due to the Washington Cares Fund

Washington's new long-term care tax is up against a class-action lawsuit and a new initiative seeking to make the program optional.
Credit: Tyler Olson - stock.adobe.com

OLYMPIA, Wash — What is the Washington Cares Fund? What's behind the class action lawsuit and Initiative 1436, seeking to modify, or halt the tax altogether? 

Washington state passed a first-of-its-kind long-term care tax in 2019 intended to help pay for long-term care expenses as the state's population gets older. Residents will start paying into the funding beginning in 2022. 

However, the tax has sparked opposition from some groups, who argue the act violates federal law or that taxpayers should have the option to opt out. Lawmakers say they intend to act on several "common sense" fixes to the act in the 2022 legislative session. 

Below is a closer look at the Washington Cares Fund, including what it does, its intended benefits, how the law could change in the future and what opponents are saying about the long-term care act. 

What is the Washington Cares Fund?

Starting in January 2022, Washington workers will pay 0.58 percent of every $100 earned into the Washington Cares Fund. 

The fund ensures taxpayers who have contributed for 10 years receive $36,500 over their lifetime to help pay for long-term care needs, like in-home care, nursing home care, hearing aids, trained support for caregivers, home-delivered meals, memory care, necessary home renovations and many other services, according to the WA Cares Fund website

The fund will begin paying out benefits in 2025. The benefit level will adjust with inflation over the years. 

The fund was created to address gaps in private long-term care insurance and to provide for older residents with no insurance or ability to pay for long-term care costs, which otherwise fall to Medicaid.

A survey conducted by AAPR of Washington found 50 percent of 65-year-olds have no money in retirement savings. The same survey found 75 percent of respondents wrongly believed private insurance would pay for a stay at a nursing home, and 78 percent of respondents wrongly believed private insurance would pay for a home visit by a paid caregiver.

"While families are far and away the main providers of long-term care, when more help is needed it’s Medicaid that bears the cost," said Dan Murphy, executive director of the Northwest Regional Council Area Agencies on Aging. "So WA Cares helps protect Medicaid from a cost explosion as the age wave crests." 

Although private long-term care insurance is available, it can exclude certain people based on pre-existing conditions and can cost more for women than men, Murphy said. People also have to keep paying into private insurance, while payments into the WA Cares Fund stop when someone retires. 

The deadline to opt out of the state's long-term care tax passed on Nov. 1, 2021. Those wanting to opt out had to prove to the Employment Security Department that they acquired private long-term care insurance. 

How could WA Cares change in the 2022 legislative session?

Washington legislators say they intend to make "common sense" fixes to the law in the upcoming legislative session. 

As the law stands, workers who live in other states but work in Washington cannot opt-out of the long-term care tax. Members of the Long Term Services and Supports Trust Commission also recommended the legislature allow military spouses and veterans and temporary non-immigrant permit work holders be allowed to opt-out of the tax. 

The commission is also looking into the possibility of allowing residents to take their long-term care tax funds with them if they leave Washington state. Washington State Representative Nicole Marci (D-Seattle) said the issue was complicated because long-term care services vary from state to state, "but we do think that there is work that can be done here," she said. 

Investing the WA Cares funds into a higher yield portfolio, like the state has done with state employee pension funds and funds in the paid family leave trust, would require a constitutional amendment which legislators are hoping to put on the ballot in the future.

Washington Cares faces class-action lawsuit

In early November, three companies and six individuals filed a lawsuit against Gov. Jay Inslee and other state officials, alleging the Washington Cares Fund violates federal law. 

The lawsuit argues the tax violates the Employee Retirement Income Security Act of 1974, which forbids the state from passing a law requiring employees to participate in a plan that provides sickness or medical benefits, according to Davis Wright Tremaine LLP, the firm that filed the complaint. 

None of the individuals represented in the suit purchased private long-term care insurance before the Nov. 1 deadline, meaning they will have to pay into the fund starting in January. 

One plaintiff plans to retire before reaching the required 10-year contribution deadline. Another plaintiff lives across the border in Eagle Point, Oregon. 

Proponents of the tax claim the lawsuit is an effort to push private long-term care insurance policies at the expense of more accessible long-term care options. 

"It’s not surprising to us that given the deep pockets of the opposition they’re that they’re launching a legal attack as part of their strategy to ultimately make long-term care less affordable and less accessible to Washington seniors and people with disabilities," said Madeleine Foutch with Washingtonians for a Responsible Future. 

RELATED: Class action lawsuit filed against Washington's new long-term care tax

Initiative 1436

A new initiative proposed by State Representative Jim Walsh (R-Aberdeen) would allow people to opt-out of the Washington Cares Fund. The initiative is currently in the signature-gathering phase, spearheaded by the group Reform Washington. 

According to the state’s Employment Security Department, 279,465 individuals have applied for exemptions. So far, 33.7% have been processed, with 93,039 of those individuals granted exemptions. More than 1,000 of the applications of those hoping to opt out of the fund are considered incomplete.

Proponents of the Washington Cares Fund argue the initiative will make it harder for the most vulnerable to pay for long-term care costs. 

"It is an initiative to the legislature that will make it harder for Washington families to afford and access long term care, by threatening the viability of WA Cares," Foutch said. "We’re taking this threat to WA Cares very seriously, and ultimately if brought before the legislature we believe that the legislature should reject this pathway and will reject this pathway."

If enough signatures are turned in by the end of the year for the initiative to reach the Legislature, lawmakers would have three options: make the program optional, send the issue to the voters next November, or offer an alternative to the initiative to voters.

RELATED: Initiative could change Washington's controversial long-term care fund

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